Question

For each brand in the following table, calculate the manufacturer’s selling price (MSP), the contribution per unit, and the contribution margin as a percentage of MSP. Promotional allowances are considered a variable cost.

	Brand X	Brand Y
MSRP	$5.29	$4.99
Volume Discount	30%	35%
Promotion Allowance	15%	12%
Unit Cost	$1.18	$0.74
MSP
Contribution per Unit
Contribution Margin

For large retailers, the MSP represents their product cost, which they will mark up to set the retail price. If the retailer has a target margin of 25%, what would the retail prices be for the brands in question 4?

Brand X Retail Price

Brand Y Retail Price

5. Many small retailers will buy through a wholesaler instead of buying direct from the manufactur
   1. Given the pricing policy for Brand X in question 4, what would be the wholesaler’s selling price (WSP) if the wholesaler has a desired margin of 15%?
   2. If the retailer has a desired margin of 30%, what would the retail price be?
   3. What volume discount would the manufacturer have to offer for the retailer to price at MSRP?

Answer 1

1. MSP and Contribution

2. Retail Prices

3.