The market price for a product has been $79 per unit, but competitive pressures
ID: 2560676 • Letter: T
Question
The market price for a product has been $79 per unit, but competitive pressures have reduced the market price to $75. The firm manufactures 18,000 of these products per year at a manufacturing cost of $55 per unit (including $30 fixed cost and $25 variable cost per unit). Other selling and administrative costs for the product are $10 per unit.
a) The firm ignores competitive prices because it has a differentiated product. It uses full manufacturing cost–based pricing with a 50% markup. What is the firm’s price? (Round your answer to 2 decimal places.)
firms price:
b) The firm ignores competitive prices because it has a differentiated product. It uses cost life cycle–based pricing with a 18% markup. What is the firm’s price? (Round your answer to 2 decimal places.)
firms price:
a) The firm ignores competitive prices because it has a differentiated product. It uses full manufacturing cost–based pricing with a 50% markup. What is the firm’s price? (Round your answer to 2 decimal places.)
firms price:
b) The firm ignores competitive prices because it has a differentiated product. It uses cost life cycle–based pricing with a 18% markup. What is the firm’s price? (Round your answer to 2 decimal places.)
Explanation / Answer
A) manufacturing cost = 55
Firm price = 55 (1+.50)
= $ 82.5
B) Total cost = 55+10 = 65
Firm price = 65 (1+.18)
= $76.7
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