Question

Ninja Coy., sets a suggested retail price of $400 to the consumer for its 72-oz Professional XL blender, to be competitive with that of its competitor, Cuisinart. Ninja sells its blender to a wholesaler who wants a markup of 15% based on its selling price to a retailer who also wants a markup of 20% of its selling price to the consumer:  

              

(a) a) At what price will Ninja, the manufacturer, sell the blender to the wholesaler?

(b)  b) At its price to the wholesaler, if the cost to Ninja was $122.40 per blender, what would be its markup percent on cost?

(c)  c)  If the retailer found that a nearby retail store is selling similar blender for $350, what markdown percentage must he take from the original suggested retail price to sell at the same price as its competing retailer?

(d) d)  If the retailer sold 250 units at the new price, by how much would its total profit be reduced compared to its original price of $400?

Answer 1

A. Manufacturer sale price to wholesaler

Selling price by retailer @ 20% markup = $400

Buying price of retailer (before 20% markup) = $400 x (1 - 20%) = $400 - $80 = $320

Buying price of Wholesaler (before 15% markup) = $320 x (1 - 15%) = $320 - $48 = $272

Selling price of manufacturer = $272

B. Manufacturer markup on cost

Markup = selling price - cost = $272.00 - $122.40 = $149.60

Markup on cost (%) = $149.60 / $122.40 x 100 = 122%

C. Markdown from original retail price

Markdown = ($400 - $350)/$400 x 100

Markdown = $50/$400 x 100 = 12.5%

Retailer needs to take a 12.5% markdown from the original suggested price of $400.

D. Profit at New rate

New Profit per unit = $350 - $320 = $30

New Profit for 250 units = $30 x 250 = $7,500

Old profit per unit = $400 - $320 = $80

Old profit for 250 units = $80 x 250 = $20,000

Difference / Drop in profit = $20,000 - $7,500 = $12,500