Question

Many luxury sheets cost less than? $200 to make but sell for more than? $500 in retail stores. Some cost even more dash–

consumers pay almost? $3,000 for? Frett'e "Tangeri?Pizzo" king-size luxury linens. The creators of a new brand of luxury? linens, called Boll? & Branch, have entered this market. They want to price their sheets lower than most brands but still want to earn an adequate margin on sales. The sheets come in a luxurious box that can be reused to store? lingerie, jewelry, or other keepsakes. The Boll? & Branch brand touts fair trade practices when sourcing its? high-grade long-staple organic cotton from India.

The company calculated the price to consumers to be ?$350

If the company decides to sell through retailers instead of directly to consumers? online, to maintain the consumer price at ?$350?,

at what price must it sell the product to a wholesaler who then sells it to? retailers? Assume wholesalers desire a 5

percent margin and retailers get a 30

percent? margin, both based on their respective selling prices

Answer 1

Solution

Final price to consumers (Maximum Retail Price) = $350

Wholesaler Margin = 5%

Retailer Margin = 30%

Margin of Retailers = ($350*30%) = $105

Cost to Retailers or sale price of Wholesalers = ($350 - $105) = $245

Margin of Wholesalers = ($245*5%) = $12.25

Cost to wholesalers = ($245 - $12.25) = $232.75

Hence,

1) - Selling price by frette to wholesalers = $232.75

2) - Then wholesalers will sale to retailers at $245 earning $12.25 (5%) Margin

3) - Then Retailers at the end sale to consumers at $350 earning $105 (30%) Margin.