What decrease in manufacturer price to the retailer

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Question - A manufacturer's suggested retail price (MSRP) for a consumer product is $49. The manufacturer has a marginal cost of $15 for this product and its price to a retailer is $25. Show all your calculations in the questions below.

Assume that the retailer seeks to share the burden of a price discount with the manufacturer such that its promotional price of 15-percent-off coincides with a reduction in price from the manufacturer of 7.5 percent. What are the volume hurdles faced by each of the retailer and the manufacturer under this scenario?

(a) What is the for this product at the manufacturer level?

(b) What is the initial contribution margin for this product at the retail level if it is priced at the MSRP?

(c) What is the initial contribution margin for the entire marketing channel if the product is priced at the MSRP to consumers?

(d) What is the volume hurdle associated with a 15-percent-off sale at the retail level that will leave the overall marketing channel more profitable?

(e) What decrease in manufacturer price to the retailer would deliver the same volume hurdle to both the manufacturer and the retailer under this scenario?

Reference no: EM132842440

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