Question

You get paid entirely on commission; you receive 20% of the profit. Profit is defined as the selling price minus the cost (Cost in this case = $100,000. If you sell it for $100,001, your commission is 20 cents.).

Question 1: What price would you quote the customer? What are some of the considerations that affect your decision?

Note: An unacceptable answer is something along the lines of, “I would survey the market to determine what competitive firms are charging and quote accordingly.” That would be a cop-out; what price would you charge? This is a simple question. Don’t read anything in that is not there (This is important advice for any future class that may have case studies).

Question 2: Before you send in the quotation, you reconsider the above price and decide to increase it 5%. Does this make you a “greedy” person?

Answer 1

Question 1 Answer: I need at least at lease return on sales. If you are making business of $ 100001and you are getting only 80 cents, that we can not call as a business from the anufacturers point of view and I am doing a business of 100001 and getting as 20 cents as commission not acceptable. At lease the selling price should be 20% higher. That is $120000. Then I will get 20% commission of $4000(20000*20%) and the manufacturer will get ($20000-$4000)$16000 which is reasonable.

Question 2 Answer: If the points mentioned abou applies, then it is a reasonable income. So nt expecting more than that. If you expect more than that you will be greedy.