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Ch. 19 target return on investment exercises

Suppose a tractor manufacturer has invested $5 million into the venture. The expected rate of return is 20%.

Unit cost= $50

Expected sales (demand) = 100,000 units

What is the target return pricing?

Hint: cost + (desired return x investment/sales)

Ch. 19 supply/demand exercises

At a price of $2,000 per unit, the demand for Ranger 60 mountain bikes from Cloyd's Inc. is 300 units, which is same as the number of bikes manufactured every year. If the marketing managers at Cloyd's Inc. decide to sell each bike at a price lower than $2,000 per unit, _____.

	a.	the demand and supply for the bike will attain equilibrium
	b.	an inelastic demand for the bikes will be created
	c.	the number of bikes being made will increase drastically
	d.	a shortage of bikes will be created

When the price of a product is set at a level where demand and supply are the same, price has been achieved.

	a.	symmetry
	b.	status quo
	c.	equilibrium
	d.	stability

Using this table - at what price is equilibrium?

PRICE	QUANTITY DEMANDED QUANTITY SUPPLIED	QUANTITY SUPPLIED
1.00	100 900	900
90	200 800	800
80	300 700	700
70	400 600	600
60	500 500	500
50	600 400	400
40	700 300	300
30	800 200	200

1. The two types of costs a marketer needs to consider when setting prices are:
2. Your Memory Lane creates custom art prints that use graphs and icons in a street scene to commemorate special occasions. Suppose that Your Memory Lane has priced its product at $350 per print. Further, it has determined that the companys fixed cost is $12,500, with average variable costs per print of $250. What is the fixed cost contribution per print?
3. Your Memory Lane produces custom made art prints that include graphics and icons to celebrate lifes special moments. For example, on his wedding anniversary, David had an art print produced that celebrated highlights of his ten years with his wife, Kathy. Suppose that Your Memory Lane sells the custom artwork for $500. It estimates its average variable costs to be $200 per unit produced. It figures its fixed costs to be $900,000 per year. How many prints does it have to sell to break even?
4. What if the variable costs went up to $300 per unit what would be the break even?
5. If the price was raised to $600 & variable costs are still $200 - what would be the break even?
6. Suppose that Your Memory Lane sells the custom artwork for $500. It estimates its average variable costs to be $200 per unit produced. It figures its fixed costs to be $1,00,000 per year. How many prints does it have to sell to break even?

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