1. If SMG has a status quo pricing objective and strategy in mind for this product, what would be an appropriate retail selling price, in your opinion, given what you know about current toothpaste prices in stores right now? Suggested Retail Selling Price: Briefly what are the most important pros and cons of this type of pricing objective?
2. If SMG has a sales volume maximization objective in mind for the brand, what would be an appropriate retail selling price, in your opinion, given what you know about current toothpaste prices in the stores right now? Suggested Retail Selling Price: Briefly what are the most important pros and cons of this type of pricing objective?
3. If SMG has an image, or prestige-oriented pricing objective and strategy in mind for this toothpaste, what would be an appropriate retail selling price, in your opinion, given what you know about current toothpaste prices in the stores right now? Suggested Retail Selling Price: Briefly what are the most important pros and cons of this type of pricing objective?
4. Mother important input into the wholesale selling price decision is SMG’s cost structure for the new product. Here is the information the company has given you to help them in their decision:
The variable cost per unit is 75 cents. These variable costs are basically labor and materials required to manufacture each tube of toothpaste. The fixed cost allocation to this new product is $1.5 million, which includes factory space allocation, utilities, management salaries, and marketing costs, among other things. If SMG sets the wholesale selling price they will charge to Walgreen’s (and other retailers) at $2.50, then what is SMG’s breakeven volume in units? In other words, how many tubes of toothpaste would SMG need to sell to retailers to break even and cover their fixed costs for the product? Show your work.
5. Given that businesses seek to earn profits, not just break even, calculate how many tubes of toothpaste SMG must sell to earn a $100,000 profit.
