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6.E: Marketing Applications (Exercises)

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    37949
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    6.1 Exercises

    Round all money to two decimals and percentages to four decimals in each of the following questions.

    Mechanics

    For questions 1–4, solve for the unknown variables (identified with a ?) based on the information provided. “N/A” indicates that the particular variable is not applicable in the question.

    List Price or MSRP First Discount Second Discount Third Discount Net Price Equivalent Single Discount Rate Total Discount Amount
    1. $980.00 42% N/A N/A ? N/A ?
    2. ? 25% N/A N/A $600.00 N/A ?
    3. $1,975.00 25% 15% 10% ? ? ?
    4. ? 18% 4% 7% $366.05 ? ?

    Applications

    1. A wholesaler of stereos normally qualifies for a 35% trade discount on all electronic products purchased from its manufacturer. If the MSRP of a stereo is $399.95, what net price will the wholesaler pay?
    2. Mary is shopping at the mall where she sees a sign that reads, “Everything in the store is 30% off, including sale items!” She wanders in and finds a blouse on the clearance rack. A sign on the clearance rack states, “All clearance items are 50% off.” If the blouse is normally priced at $69.49, what price should Mary pay for it?
    3. A distributor sells some shoes directly to a retailer. The retailer pays $16.31 for a pair of shoes that has a list price of $23.98. What trade discount percent is the distributor offering to its retailers?
    4. A retailer purchases supplies for its head office. If the retailer pays $16.99 for a box of paper and was eligible for a 15% volume discount, what was the original MSRP for the box of paper?
    5. Mountain Equipment Co-op has purchased a college backpack for $29 after discounts of 30%, 8%, and 13%. What is the MSRP for the backpack? What single discount is equivalent to the three discounts?
    6. Walmart purchased the latest CD recorded by Selena Gomez. It received a total discount of $10.08 off the MSRP for the CD, which represents a discount percent of 42%.
      1. What was the MSRP?
      2. What was the net price paid for the CD?
    7. Best Buy just acquired an HP Pavilion computer for its electronics department. The net price on the computer is $260.40 and Best Buy receives discounts of 40% and 38%.
      1. What single discount is equivalent to the two discounts?
      2. What is the list price?
      3. What is the total discount amount?
    8. TELUS retails a Samsung cellphone at the MSRP of $399.99. TELUS can purchase the phone from its supplier and receive a 20% trade discount along with a 5% volume discount.
      1. What is the single equivalent percent discount?
      2. What net price does TELUS pay for the phone?
      3. How much of a discount in dollars does this represent?
    9. 13. A wholesaler offers the following discounts: 10% seasonal discount for all purchases made between March 1 and May 1, 15% cumulative quantity discount whenever more than 5,000 units are purchased in any month, 5% loyalty discount for customers who have made regular purchases every month for at least one year, and a 33% trade discount to any retailer. Ed’s Retail Superstore makes a purchase of 200 watches, MSRP $10, from the wholesaler on April 29. This month alone, Ed’s has ordered more than 5,000 watches. However, Ed’s has purchased from the wholesaler for only the past six months. Determine the total price that Ed’s should pay for the watches.
    10. If a distributor is eligible for a 60% trade discount, 5% volume discount, and 3% seasonal discount, what single equivalent discount rate would it be eligible to receive? If the trade discount is applied first and equals a trade discount of $48, calculate the net price for the item.

    Challenge, Critical Thinking, & Other Applications

    As mentioned in one of the "Paths to Success" sections, discount percentages share a commonality with negative percent changes (Section 3.1). Use the formulas from this chapter to solve questions 15–17 involving percent change.

    1. A human resource manager needs to trim labour costs in the following year by 3%. If current year labour costs are $1,231,498, what are the labour costs next year?
    2. At an accounting firm, the number of accountants employed is based on the ratio of 1:400 daily manual journal entries. Because of ongoing increases in automation, the number of manual journal entries declines at a constant rate of 4% per year. If current entries are 4,000 per year, how many years and days will it take until the firm needs to lay off one accountant? (Hint: An accountant is laid off when the number of journal entries drops below 3,600.)
    3. An economist is attempting to understand how Canada reduced its national debt from 1999 to 2008. In 1999, Canada’s national debt was $554.143 billion. In 2008, the national debt stood at $457.637 billion. What percentage had the national debt been reduced by during this time period?
    4. Sk8 is examining an invoice. The list price of a skateboard is $109.00, and the invoice states it received a trade discount of 15% and quantity discount of 10% as well as a loyalty discount. However, the amount of the loyalty discount is unspecified.
      1. If Sk8 paid $80.88 for the skateboard, what is the loyalty discount percent?
      2. If the loyalty discount is applied after all other discounts, what amount of loyalty dollars does Sk8 save per skateboard?
    5. Currently, a student can qualify for up to six different tuition discounts at a local college based on such factors as financial need or corporate sponsorships. Mary Watson just applied to the college and qualifies for all six discounts: 20%, 15%, 23%, 5%, 3%, and 1%.
      1. She is confused and wants the college to tell her what single discount percent she is receiving. What should the college tell her?
      2. If her total list tuition comes to $6,435.00, how much should she pay?
    6. Sumandeep is very loyal to her local hairstylist. Because she is loyal, her hairstylist gives her three different discounts: 10%, 5%, and 5%. These discounts amount to $14.08 in savings.
      1. What was the list price her hairstylist charged her?
      2. What amount did she pay her hairstylist?
      3. If her hairstylist increases prices by 5%, what are the list price, net price, and total discount amount?

    6.2 Exercises

    Round all money to two decimals and percentages to four decimals for each of the following exercises.

    Mechanics

    For questions 1–8, solve for the unknown variables (identified with a ?) based on the information provided.

    Regular Unit Selling Price Cost Expenses Profit Markup Amount Break-Even Price Markup on Cost Markup on Selling Price
    1. ? $188.42 $48.53 $85.00 ? ? ? ?
    2. $999.99 ? 30% of C 23% of C ? ? ? ?
    3. ? ? ? 10% of S $183.28 ? 155% ?
    4. $274.99 ? 20% of S ? ? ? ? 35%
    5. ? ? 45% of C ? $540.00 $1,080.00 ? ?
    6. ? $200 less 40% ? 15% of S ? ? 68% ?
    7. ? ? $100.00 ? $275.00 ? ? 19%
    8. ? ? 15% of C 12% of S ? $253.00 ? ?

    Applications

    1. If a pair of sunglasses sells at a regular unit selling price of $249.99 and the markup is always 55% of the regular unit selling price, what is the cost of the sunglasses?
    2. A transit company wants to establish an easy way to calculate its transit fares. It has determined that the cost of a transit ride is $1.00, with expenses of 50% of cost. It requires $0.75 profit per ride. What is its markup on cost percentage?
    3. Daisy is trying to figure out how much negotiating room she has in purchasing a new car. The car has an MSRP of $34,995.99. She has learned from an industry insider that most car dealerships have a 20% markup on selling price. What does she estimate the dealership paid for the car?
    4. The markup amount on an eMachines desktop computer is $131.64. If the machine regularly retails for $497.25 and expenses average 15% of the selling price, what profit will be earned?
    5. Manitoba Telecom Services (MTS) purchases an iPhone for $749.99 less discounts of 25% and 15%. MTS’s expenses are known to average 30% of the regular unit selling price.
      1. What is the regular unit selling price if a profit of $35 per iPhone is required?
      2. What are the expenses?
      3. What is the markup on cost percentage?
      4. What is the break-even selling price?
    6. A snowboard has a cost of $79.10, expenses of $22.85, and profit of $18.00.
      1. What is the regular unit selling price?
      2. What is the markup amount?
      3. What is the markup on cost percentage?
      4. What is the markup on selling price percentage?
      5. What is the break-even selling price? What is the markup on cost percentage at this break-even price?

    Challenge, Critical Thinking, & Other Applications

    1. A waterpark wants to understand its pricing better. If the regular price of admission is $49.95, expenses are 20% of cost, and the profit is 30% of the regular unit selling price, what is the markup amount?
    2. Sally works for a skateboard shop. The company just purchased a skateboard for $89.00 less discounts of 22%, 15%, and 5%. The company has standard expenses of 37% of cost and desires a profit of 25% of the regular unit selling price. What regular unit selling price should Sally set for the skateboard?
    3. If an item has a 75% markup on cost, what is its markup on selling price percentage?
    4. A product received discounts of 33%, 25%, and 5%. A markup on cost of 50% was then applied to arrive at the regular unit selling price of $349.50. What was the original list price for the product?
    5. Mountain Equipment Co-op (MEC) wants to price a new backpack. The backpack can be purchased for a list price of $59.95 less a trade discount of 25% and a quantity discount of 10%. MEC estimates expenses to be 18% of cost and it must maintain a markup on selling price of 35%.
      1. What is the cost of backpack?
      2. What is the markup amount?
      3. What is the regular unit selling price for the backpack?
      4. What profit will Mountain Equipment Co-op realize?
      5. What happens to the profits if it sells the backpack at the MSRP instead?
    6. Costco can purchase a bag of Starbucks coffee for $20.00 less discounts of 20%, 15%, and 7%. It then adds a 40% markup on cost. Expenses are known to be 25% of the regular unit selling price.
      1. What is the cost of the coffee?
      2. What is the regular unit selling price?
      3. How much profit will Costco make on a bag of Starbucks coffee?
      4. What markup on selling price percentage does this represent?
      5. Repeat questions (a) through (d) if the list price changes to $24.00.

    6.3 Exercises

    Round all money to two decimals and percentages to four decimals for each of the following exercises.

    Mechanics

    For questions 1–6, solve for the unknown variables (identified with a ?) based on the information provided.

    Regular Selling Price Markdown Amount Markdown Percent Sale Price
    1. $439.85 ? 35% ?
    2. ? $100.00 ? $199.95
    3. $1,050.00 ? ? $775.00
    4. $28,775.00 $3,250.00 ? ?
    5. ? ? 33% $13,199.95
    6. ? $38.33 12% ?

    Applications

    1. A pair of Nike athletic shoes is listed at a regular selling price of $89.99. If the shoes go on sale for 40% off, what is the sale price?
    2. During its special Bay Days, The Bay advertises a Timex watch for $39.99 with a regular price of $84.99. Calculate the markdown percent and markdown amount.
    3. For spring break you are thinking about heading to Tulum, Mexico. In planning ahead, you notice that a one-week stay at the Gran Bahia Principe Tulum, regularly priced at $2,349 for air and six nights all inclusive, offers an early-bird booking discount of $350. What markdown percentage is being offered for booking early?
    4. A Heritage Infusio deep frying pan is advertised at 70% off with a sale price of $39.99. What is the frying pan's regular selling price, and what markdown amount does this represent?
    5. A mass merchandiser uses its Lagostina cookware product line as a marketing tool. The cookware is always on sale at an advertised price of 45% off. The cost of the cookware is $199.99, expenses are $75, and the planned profit at the sale price is $110. Calculate the sale price and selling price for the cookware.
    6. Quicky Mart regularly sells its Red Bull sports drink for $2.99 per can. Quicky Mart noticed that one of its competitors down the street sells Red Bull for $1.89. What markdown percentage must Quicky Mart advertise if it wants to match its competitor?
    7. A hardware store always advertises a Masterdesigner 75-piece screwdriver set at 80% off for a sale price of $17.99.
      1. If the cost of the set is $10 and expenses are 30% of the sale price, what is the planned profit when the product is on sale?
      2. What profit is earned if the product actually sells at its regular selling price?
    8. A campus food outlet is advertising a “Buy one, get one 25% off” deal. The 25% off comes off the lower-priced item. If you purchase a chicken dinner for $8.99 and your friend gets the burger combo for $6.99, what is the markdown percentage on the total price?
    9. Blast’em Stereos purchases a stereo system for $1,900 less two discounts of 40% and 18%. The store uses this product to draw customers to the store and always offers the stereo on sale at 25% off. When the stereo is on sale, it plans on expenses equaling 30% of the cost and a profit of 20% of the sale price.
      1. What is the sale price for the stereo?
      2. How much profit does Blast’em make when the stereo sells at the sale price?
      3. By law, this stereo must sell at the regular selling price for a period of time before going on sale. What is the regular selling price?
      4. What profit does Blast’em earn if a customer purchases the stereo during this initial period?

    Challenge, Critical Thinking, & Other Applications

    1. Frigid Boards purchases one of its snowboards for $395 less a retail trade discount of 15% and a loyalty discount of 4%. Its markup on selling price percentage on all snowboards is 21%. At the end of the season, any leftover snowboards are marked down by 10%. What is the sale price for the snowboard?
    2. An HP LaserJet printer has an MSRP of $399.95. It is subject to trade discounts of 30% and 23%. The LaserJet is a featured item for a computer store and is always on sale. The store plans to sell the LaserJet for a sale price that allows it to cover expenses equalling 15% of cost and realize a profit of $35.00.
      1. What is the sale price?
      2. If the MSRP is the regular unit price of the printer, what rate of markdown can the computer store advertise?
      3. What markup on selling price percentage is realized at the sale price?
    3. The Brick advertises that when you purchase a queen-size Tempur-Pedic mattress set for $2,499.97 it will give you a 51" 3-D plasma television with a 3-D starter kit included. The value of this gift is $1,199.99. What markdown percent does this represent?
    4. A Maytag 27 cubic foot refrigerator retails for $2,400.00 at Landover Appliance Centre. The company, which is celebrating its 30th anniversary this coming weekend, features the fridge for 30% off. The markup on selling price percentage on the fridge at the regular unit selling price is 53%.
      1. What is the sale price?
      2. At the sale price, what is the markup on selling price percentage?
      3. If the expenses are 15% of the regular selling price, what is the profit when the fridge is on sale?
    5. Dreger Jewellers is selling a diamond bracelet. It uses this bracelet in its promotions and almost always has it on sale. The cost of the bracelet is $2,135 less discounts of 20% and 30%. When the bracelet is on sale for 25% off, the expenses are 15% of cost and the profit is 20% of cost.
      1. What is the sale price?
      2. What is the bracelet’s regular selling price?
      3. If the bracelet sells at the regular selling price, what are the markup amount and the markup on cost percent?

    6.4 Exercises

    Round all money to two decimals and percentages to four decimals for each of the following exercises.

    Mechanics

    For questions 1–4, solve for the unknown variables (identified with a ?) based on the information provided.

    Regular Unit Selling Price Cost Unit Expenses Profit Markup Amount Break-Even Price Markup on Cost Markup on Selling Price Markdown Amount Markdown Percent Sale Price
    1. $100.00 ? 24% of C ? ? ? 100% 50% ? 33% ?
    2. ? ? ? $20.00 $30.00 ? ? ? $13.00 ? $37.00
    3. ? $56.25 ? 10% of S ? ? 33⅓% ? ? ? $64.99
    4. $99.99 $43.00 ? ? ? $78.50 ? 15% ? 10% ?

    For questions 5–8, solve for the unknown variables (identified with a ?) based on the information provided. N/A indicates that the particular variable is not applicable in the question.

    Regular Unit Selling Price Unit Cost Regular Unit Expenses Coupon or Rebate Handling Expense per Unit Coupon or Rebate Redemption Expense per Unit Coupon or Rebate Marketing Expense per Unit Profit w/o Coupon or Rebate per Unit Profit with Coupon or Rebate per Unit
    5. $9.85 $4.73 35% of C $0.25 $2.00 $0.75 ? ?
    6. $47.65 $23.50 15% of S N/A $10.00 $3.50 ? ?
    7. $6.30 ? $0.95 $0.45 ? $1.15 $3.05 $0.45
    8. ? $38.25 40% of C N/A ? $2.25 $21.40 $4.15

    Applications

    1. A box of glossy inkjet photo paper costs $9.50. The markup on cost is 110%. The profit is 31.5% of the cost. The paper occasionally goes on sale for 20% off.
      1. What are the regular unit selling price, expenses, profit, markup amount, and markup on selling price percentage?
      2. When the paper goes on sale, what are the sale price, markdown amount, markup dollars, and markup on selling price percentage?
    2. John’s Bakery is thinking of distributing a $0.50 coupon for one of its least popular brands of bread in hopes of increasing its sales. The bread costs $0.43 to produce, and expenses are 10% of the regular unit selling price. The bread retails for $1.99 per loaf. John’s Bakery estimates that the coupon marketing expenses are $0.25 per loaf sold, and coupon handling expenses would be an additional $0.10 per loaf sold.
      1. What is John’s Bakery profit when the loaf is sold at the regular unit selling price without the coupon?
      2. If John’s Bakery uses the coupon, what is the profit?
      3. If the bread still doesn’t sell well, John’s Bakery will clear it out while still allowing consumers to use the coupon. What is the break-even selling price for a loaf in this situation?
    3. An airline needs to maintain an average markup of $230 on a daily return flight from Toronto to Vancouver. The Boeing 737-800 has a capacity of 166 passengers, and the cost per passenger is $175. Typically 90% of tickets are sold at full fare while 10% are sold on standby at a sale price equaling $200 off the regular price. What regular and sale prices should the airline set to maintain the average markup?
    4. A mail-in rebate form is printed on the side of every High Liner box of breaded fish. It allows the consumer to mail in the UPC along with the form and receive a $2 rebate. If a 700 g box of fish is normally sold to grocery stores for $3.50, costs are 40% of the regular unit selling price, and expenses are 20% of cost, what is the expected profit under the rebate program? Assume that only 25% of rebates are actually redeemed and that rebate marketing expenses are $0.15 per box.
    5. Lay’s Potato Chips is thinking of distributing a coupon on its 454 g bag of regular crinkled chips. Currently, the cost of producing a bag of chips is $0.49, with typical expenses of $0.23 per bag. Lay’s sells the bag to retailers for $1.75 per bag. The coupon is in the amount of $0.50, while retailers are offered $0.12 for handling expenses. Lay’s forecasts an increase in sales of 300,000 bags with the coupon, incurring total marketing expenses of $100,000. Will running this coupon promotion be profitable for Lay’s? What is its profit (or loss) per unit if Lay’s goes forward with the coupon?
    6. LG is thinking of placing a $30 mail-in rebate on its 19” widescreen computer monitor. The cost to produce a monitor is $67.40, with typical expenses amounting to 50% of the cost. The monitor is sold to retailers for $119.00. Based on previous rebate programs, LG knows that only 40% of those who purchased a monitor with a rebate will actually redeem it. The marketing expense associated with the rebate totals $350,000, resulting in increased sales of 50,000 monitors. Is the rebate program profitable for LG? What is its profit (or loss) per monitor if it proceeds with the rebate offer?
    7. A car dealership acquired a used Ford Mustang for $15,000. Its expenses on used vehicles are 15% of the cost, and it prices the vehicle with a 30% markup on cost percentage. After two months, if the car doesn’t sell, it marks the car down by 10%.
      1. What are the expenses?
      2. What is the dollar amount of the markup?
      3. What is the regular selling price?
      4. What is the markup on selling price percentage?
      5. What is the sale price?
      6. What is the amount of the markdown?
      7. What is the profit earned if the car is sold at the sale price?
      8. What is the maintained markup supposing the dealership was able to acquire eight used Ford Mustangs at the same cost, where five cars are sold at regular price and three are sold at the sale price?

    Challenge, Critical Thinking, & Other Applications

    1. Target is trying to determine whether it would be more profitable to use a coupon or a mail-in rebate when promoting a new supersoaker water gun. The toy costs $14.94 and retails for $29.95. Expenses are 30% of cost. The coupon is for $4, handling expenses are $0.50 per unit, and the marketing expenses are $1 per unit. The rebate is for $7.75, with 45% of the rebate forms expected to be redeemed. Rebate marketing expenses are $1.25 per unit.
      1. If Target forecasts that sales will increase 10,000 units under the coupon program and 8,000 units under the rebate program, should it use the coupon or the mail-in rebate?
      2. How much more profit is earned based on your recommended option?
    2. A hair salon has limited shelf space to carry shampoo products. The store’s pricing policies have a markup on cost of 220%, and expenses equal 20% of cost. Two suppliers have approached the salon with the following offers:
      1. Supplier #1: The shampoo has a list price of $29 with discounts of 60% and 20%. Over a six-month period, 150 bottles are expected to be sold at full price and 50 bottles at a 25% markdown during a special promotion.
      2. Supplier #2: The shampoo has a list price of $37 with discounts of 70% and 10%. Over a six-month period, 120 bottles are expected to be sold at full price and 75 bottles at a 20% markdown during a special promotion.

    Based on this information, recommend which supplier the salon should purchase the shampoo from. Show calculations to support your answer.

    1. The Home Depot purchases garden sheds for $1,000 less discounts of 40% and 20% and then sells them at a 100% markup on cost percentage. Seasonally, these sheds sell for full price initially followed by a reduced price and then are blown out at 50% off the regular price. Past experience indicates that 60% of the sheds sell at full price, 30% at the reduced price, and 10% at the blowout price. What should the reduced price be set at to achieve a maintained markup of $360?
    2. CCM sells ice skates to Sport Chek for $179.99 less a trade discount of 40% and a quantity discount of 15%. The ice skates cost $27.60 to manufacture, and associated expenses are 35% of the regular unit selling price. CCM runs a mail-in rebate program on the ice skates where consumers receive $50 on a pair of skates. CCM estimates that 40% of purchasers will redeem the rebate. Rebate marketing expenses are estimated at $6 per pair sold. What is CCM’s profitability under the rebate program?
    3. Canadian Tire purchases a camping tent from its supplier at an MSRP of $79.99 less discounts of 40% and 25%. It plans to sell the tent at the MSRP, and its expenses are 20% of the selling price. At the end of the season, remaining tents are sold at 30% off.
      1. What are the expenses?
      2. What is the profit?
      3. What is the dollar amount of the markup?
      4. What is the markup on selling price percentage?
      5. What is the markup on cost percentage?
      6. What is the sale price?
      7. What is the amount of the markdown?
      8. What is the profit earned when tents are sold at the sale price?
      9. What is the maintained markup if 90% of tents are sold at the regular price and 10% of tents are sold at the sale price?

    Review Exercises

    Round all money to two decimals and percentages to four decimals for each of the following exercises.

    Mechanics

    1. The Gap is purchasing an Eminem graphic T-shirt for its stores. If the list price for the T-shirt is $34.50 and the Gap can receive a 40% trade discount, what net price will the Gap pay?
    2. Nike has been approached by a retailer who wants to carry their Shox brand. The retailer needs a trade discount of 30% and its wholesaler needs 15%. The retailer also wants a 5% quantity discount. If the MSRP for the shoes is $195.00, what is the wholesale (net) price that Nike will charge?
    3. If the regular price of a product is $775.00 and it is eligible to receive discounts of 14%, 8%, and 5%, what single discount percentage is equal to the multiple discount percentages? Show calculations that show how the single and multiple discounts produce the same net price.
    4. Subway wants to price a new 12 inch sandwich. The cost of all the ingredients is $1.23. Expenses are 200% of cost, and Subway wants to earn a profit of 187% of cost. What is the regular selling price of the new sandwich?
    5. If the cost of a Bose Wave music system is $27.82 and the list price is $49.99, determine the markup amount. Express the markup both as a percentage of cost and percentage of selling price.
    6. Rogers Communications is thinking about having a special promotion on its Digital One Rate 250 Plan, which offers 250 minutes of cellular calling. If the current price is $85.00 per month and Rogers wants to put it on special for $75.00 per month, what is the percentage markdown?
    7. If a $1 coupon is distributed for a product that normally has a profit of $4 per unit, how much is the profitability reduced if coupon handling expenses are $0.30 per unit and coupon marketing expenses are $1.10 per unit? What is the profit under the coupon program?
    8. At a local retailer, a swimsuit costs $10 and sells for $30. At the end of the season, the swimsuit price is reduced by 30%. If 820 swimsuits are sold at the regular price and 145 swimsuits are sold at the sale price, what is the maintained markup?

    Applications

    1. An iMac has an MSRP of $774.99 with available trade discounts of 20% to the retailer and an additional 15% to the wholesaler.
      1. What price should a retailer pay for the product? What is the dollar value of the discount?
      2. What price should a wholesaler pay for the product? How much less than the retailer’s price is this?
      3. Overall, what single discount percent does the wholesaler receive?
    2. The marketing manager for Tim Hortons is attempting to price a cup of coffee. She knows that the cost of the coffee is $0.14 per cup, and expenses are 30% of the regular selling price. She would like the coffee to achieve an 88.24% markup on selling price.
      1. What is the regular selling price for a cup of coffee?
      2. What is the profit per cup?
      3. What is the markup on cost percentage?
    3. A grocery store head office is thinking of distributing a $3 in-store coupon for one of its 454 g bags of coffee. The cost of the coffee to one of the franchised retail stores is $6.34, and it is usually sold to consumers for $12.99. A retail store incurs expenses of 25% of the regular selling price to stock, shelve, and sell the coffee. The franchisees are reimbursed $0.25 per coupon redeemed for handling expenses, and the head office estimates that it incurs marketing expenses amounting to $1.35 per coupon. Based strictly on the profit associated with the sale of this coffee, should the head office proceed with this promotion?
    4. Jonathan needs a new business suit for a presentation in his communications course. He heads to Moores and finds a suit on sale for 33% off. The regular price of the suit is $199.50.
      1. What is the sale price?
      2. What is the dollar amount of the markdown?
    5. Birchwood Honda needs to clear out its Honda generators for an end-of-season sale. If the dealership pays $319.00, has expenses of 15% of cost, and profits of 30% of the regular unit selling price, what markdown percentage can the dealership advertise if it wants to break even during the sale?
    6. eMachines has decided to issue a $50 mail-in rebate on one of its best-selling desktop computers. Retailers purchase the machines directly from eMachines for a list price of $449.00 less a 40% trade discount. eMachines has profits of 35% of its regular unit selling price and expenses of 20% of its regular unit selling price.
      1. What is the profit per computer during the rebate, assuming rebate marketing expenses of $13.50 per unit and an expected redemption rate of 35%?
      2. How much lower is the profit with the rebate than without the rebate?
      3. If 2,500 computers are sold at regular price and 1,025 computers are sold through the rebate program, what is the maintained markup?

    Challenge, Critical Thinking, & Other Applications

    1. A retailer purchasing the Halo 3 video game is eligible to receive a trade discount, quantity discount, and loyalty discount. If the net price of the game is $22.94, the list price is $39.99, the trade discount is 25%, and the quantity discount is 15%, what percentage is the loyalty discount?
    2. An article in a business paper on October 22, 2008, reported that the benchmark S&P/TSX Composite Index ended down 558.92 points for the day, or 5.7%. It went on further to state that the index is down 30% for the year 2008. Rounding all point values to two decimals, answer the following:
      1. What were the point values on October 21 and 22, respectively?
      2. What was the point value at the start of the year 2008?
    3. Whistler Blackcomb Ski Resort purchased 400 pairs of skis for sale in its retail store. It sells the skis at an MSRP of $299.99. It is eligible to receive discounts of 35% and 20% on its purchase. Expenses average 15% of cost. If it sells 300 pairs of skis at the regular unit selling price and the other 100 skis are sold during a clearance sale for 20% off, what is the total amount of profit that Whistler Blackcomb earns? What is the maintained markup?
    4. A company is examining its options for selling a product listed at $359.97. Both expenses and profits are 20% and 22% of the regular unit selling price, respectively. At this price, the company forecasts sales of 6,000 units. Consider the following two scenarios:
      1. Scenario A: If the company holds a sale and marks down the product by 10%, its market research predicts that sales will rise to 11,225 units.
      2. Scenario B: If the company issues a $60.00 mail-in rebate, it will have increased marketing expenses of $6.35 per unit. Only 45% of rebates are expected to be redeemed. Market research predicts that sales will rise to 10,500 units.

    Should the company leave the product at its regular price, conduct the sale, or issue the mail-in rebate?

    1. Indigo is stocking a new hardcover book. The book has a cover price of $44.99 and Indigo is eligible to receive discounts of 25%, 8%, 4%, and 1%. Expenses are 20% of cost. The book sells for the cover price.
      1. What is the profit per book?
      2. Some new books are launched at 30% off the cover price. From a strictly financial perspective, would it be wise for Indigo to use this approach for this book? Why or why not?
    2. Mary is shopping for a new George Foreman grill. While shopping at Polo Park Shopping Centre, she came across the following offers at three different retail stores:
      1. Offer #1: Regular price $149.99, on sale for 30% off.
      2. Offer #2: Regular price $169.99, on sale for 15% off plus an additional 30% off.
      3. Offer #3: Regular price $144.95, on sale for 10% off plus an additional 15% off. Mary also gets a 5% loyalty discount at this store.

    Which is the best offer for Mary?

    Contributors and Attributions


    This page titled 6.E: Marketing Applications (Exercises) is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Jean-Paul Olivier via source content that was edited to the style and standards of the LibreTexts platform; a detailed edit history is available upon request.