2. McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

3. One of the Most Difficult Decisions in Marketing $

4. Product Place Promotion Price

6. Price must be a reflection of value Product Price

7. Price must be a reflection of value Product Price

8. Price must be a reflection of value Product Price

9. Price must be a reflection of value Product Price

10. Price must be a reflection of value Product Price

11. Price must be a reflection of value Product Price...

12. Value Value is the ratio of perceived benefits to price; or Value = (Perceived benefits divided by Price). 12-11

13. Value Value is the ratio of perceived benefits to price; or Value = (Perceived benefits divided by Price). 12-12 Benefits = a dollar and some change worth of value

14. Value Value is the ratio of perceived benefits to price; or Value = (Perceived benefits divided by Price). 12-13 Benefits = a dollar and some change worth of value = good value..

15. Value Value is the ratio of perceived benefits to price; or Value = (Perceived benefits divided by Price). 12-14. Product Price.

16. Value Value is the ratio of perceived benefits to price; or Value = (Perceived benefits divided by Price). 12-15. Product Price.

17. Value Value is the ratio of perceived benefits to price; or Value = (Perceived benefits divided by Price). 12-16. Product Price.

18. Price must be a reflection of value Product Price

19. Profit Equation Profit = Total Revenue- Total Cost

20. Profit Equation Profit = Total Revenue- Total Cost.20 per glass.30 per glass

21. Profit Equation Profit = (Unit Price × Quantity Sold) – (Fixed Cost – Variable Cost)

22. Profit Equation Total Revenue x Quantity Sold Unit Price 70 glasses = $35 Profit = (Unit Price × Quantity Sold) – Fixed Cost – Variable Cost

23. Profit Equation Profit = (Unit Price × Quantity Sold) – Fixed Cost – Variable Cost.50 x 70 glasses = $35 Total Revenue Fixed cost = $5Variable cost =.20 per sale.

24. Profit Equation Profit = (Unit Price × Quantity Sold) – Fixed Cost – Variable Cost.50 x 70 glasses = $35 Total Revenue Fixed cost = $5Variable cost =.20 per sale

25. Profit Equation Profit = (Unit Price × Quantity Sold) – Fixed Cost – Variable Cost.50 x 70 glasses = $35 Total Revenue Fixed cost = $5Variable cost = $14

26. Profit Equation Profit = (Unit Price × Quantity Sold) – Fixed Cost – Variable Cost Profit = (.50 x 70) – 5 - 14

27. Profit Equation Profit = (Unit Price × Quantity Sold) – Fixed Cost – Variable Cost Profit = 35 – 5 - 14 = 16

28. Profit Equation Profit = (Unit Price × Quantity Sold) – Fixed Cost – Variable Cost Profit = 35 – 5 - 14 = 16 Profit = (P × Q) – [FC + (UVC × Q)] Price Quantity Fixed Cost Unit variable cost Quantity (.50 X 70) [5 + (.20 X 70)] = 16 -

29. General Pricing Approaches

30. End of Part One.

31. McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Part Two.

32. General Pricing Approaches ● Demand-Oriented Pricing Approaches ● Cost-Oriented Pricing Approaches ● Profit-Oriented Pricing Approaches ● Competition-Oriented Pricing Approaches

33. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-32.

34. Skimming Price ● Beginning price is the highest possible. ● Often used for new products. http://www.apple.com/iphone/iphone-3gs/

35. Skimming Price http://www.apple.com/iphone/iphone-3gs/ PRICEPRICE Sales Volume $400 $350 $300 $250 $200 http://farm3.static.flickr.com/2218/2658111331_ea009217f2.jpg.

36. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-35

37. Penetration Pricing ● The opposite of price skimming. ● A product is sold at a very low price in order to immediately appeal to the mass market. http://www.shopping.hp.com/webapp/shopping/store

38. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-37

39. Prestige Pricing ● Prestige pricing involves setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it. ● Products prestige pricing may sell worse at lower prices than at higher ones because buyers tend to associate a lower price with lower quality. http://www.thechicecologist.com/wp-content/uploads/2008/12/diamond.jpg $30,000...

40. Prestige Pricing ● Prestige pricing involves setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it. ● Products prestige pricing may sell worse at lower prices than at higher ones because buyers tend to associate a lower price with lower quality. http://www.thechicecologist.com/wp-content/uploads/2008/12/diamond.jpg. $49.99..

41. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-40

42. Odd-Even Pricing ● Pricing at.99 instead of 1.00 ● $499.99 instead of $500. ● $29,999 instead of $30,000

43. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-42

44. Target Pricing Consumer Retailer Wholesaler Manufacturer Consumer will pay $120 Retailer will pay $60 Wholesaler will pay $36 Manufacturing cost is $32...

45. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-44

46. Bundled Pricing http://gooddesignagewell.com/2008/11/03/mcdonalds-happy-meal-of-the-future/

47. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-46

48. Yield Management Pricing http://www.aviationexplorer.com/ Airline%20Seating%20Charts/ Airbus_A320_Northwest_ Airlines_Seating_Chart.gif 28 1 2 3 4 5 6 7 89 10 11 12 13 14 $200

49. Yield Management Pricing 28 1 2 3 4 5 6 7 89 10 11 12 13 14 $200 15 $275

50. Yield Management Pricing 28 1 2 3 4 5 6 7 89 10 11 12 13 14 15 $275 17 16 $350

51. Yield Management Pricing 28 1 2 3 4 5 6 7 89 10 11 12 13 14 15 17 16 $350 18 19 20 21 22

52. Yield Management Pricing 28 1 2 3 4 5 6 7 89 10 11 12 13 14 15 17 16 $350 18 19 20 21 22 $525

53. Yield Management Pricing 28 1 2 3 4 5 6 7 89 10 11 12 13 14 15 17 16 18 19 20 21 22 $525 232425 26 27

54. Yield Management Pricing 28 1 2 3 4 5 6 7 89 10 11 12 13 14 15 17 16 18 19 20 21 22 $525 232425 26 27

55. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-54 End of Program. Go to Part Two.

56. McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Part Three.

57. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-56

58. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-57

59. Standard Markup http://www.walmart.com/browse/Toys/ $115.00 Cost 100% Markup $115.00 $230.00 +

60. Standard Markup

61. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-60

62. Cost Plus $ 1.98 mm Locomotive builder’s cost = $1.8 million + 10% profit = $180,000 Locomotive price = $1,980,000

63. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-62

64. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-63

65. Target Profit Pricing ● Based upon maximum price you can charge, fixed cost, variable cost, and number of units sold, you set your price to get a desired profit.

66. Target Profit Pricing Target Profit = $34,000 To calculate a target profit price for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 Target Profit = Total Revenue – Total Cost Target Profit = (Price x Quantity) – [Fixed Cost + (Unit Variable Cost x Quantity)] $34,000 = Price x 1,800 Units – [$30,000 + ($42.00 x 1,800 Units)]

67. Target Profit Pricing Target Profit = $34,000 To calculate a target profit price for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 Target Profit = Total Revenue – Total Cost Target Profit = (Price x Quantity) – [Fixed Cost + (Unit Variable Cost x Quantity)] $34,000 = Price x 1,800 Units – ($30,000 + $74,600) You will need to manually advance to the next slide

68. Target Profit Pricing Target Profit = $34,000 To calculate a target profit price for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 Target Profit = Total Revenue – Total Cost Target Profit = (Price x Quantity) – [Fixed Cost + (Unit Variable Cost x Quantity)] $34,000 = 1800 P ( x ) - ( $30,000 + $75,600 ) You will need to manually advance to the next slide $34,000 = Price x 1,800 Units – ($30,000 + $74,600)

69. Target Profit Pricing Target Profit = $34,000 To calculate a target profit price for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 Target Profit = Total Revenue – Total Cost Target Profit = (Price x Quantity) – [Fixed Cost + (Unit Variable Cost x Quantity)] $34,000 = Price x 1,800 Units – [$30,000 + ($42.00 x 1,800 Units)] $34,000 1800 P - $105,600 = - You will need to manually advance to the next slide

70. Target Profit Pricing Target Profit = $34,000 To calculate a target profit price for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 Target Profit = Total Revenue – Total Cost Target Profit = (Price x Quantity) – [Fixed Cost + (Unit Variable Cost x Quantity)] $34,000 = Price x 1,800 Units – [$30,000 + ($42.00 x 1,800 Units)] $34,0001800 P - $105,600 = - You will need to manually advance to the next slide

71. Target Profit Pricing Target Profit = $34,000 To calculate a target profit price for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 Target Profit = Total Revenue – Total Cost Target Profit = (Price x Quantity) – [Fixed Cost + (Unit Variable Cost x Quantity)] $34,000 = Price x 1,800 Units – [$30,000 + ($42.00 x 1,800 Units)] 1800 P - $139,600 = You will need to manually advance to the next slide -

72. Target Profit Pricing Target Profit = $34,000 To calculate a target profit price for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 Target Profit = Total Revenue – Total Cost Target Profit = (Price x Quantity) – [Fixed Cost + (Unit Variable Cost x Quantity)] $34,000 = Price x 1,800 Units – [$30,000 + ($42.00 x 1,800 Units)] 1800 - $139,600 = You will need to manually advance to the next slide - P

73. Target Profit Pricing Target Profit = $34,000 To calculate a target profit price for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 Target Profit = Total Revenue – Total Cost Target Profit = (Price x Quantity) – [Fixed Cost + (Unit Variable Cost x Quantity)] $34,000 = Price x 1,800 Units – [$30,000 + ($42.00 x 1,800 Units)] 1800 $139,600 = You will need to manually advance to the next slide P

74. Target Profit Pricing Target Profit = $34,000 To calculate a target profit price for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 Target Profit = Total Revenue – Total Cost Target Profit = (Price x Quantity) – [Fixed Cost + (Unit Variable Cost x Quantity)] $34,000 = Price x 1,800 Units – [$30,000 + ($42.00 x 1,800 Units)] $77.56 = You will need to manually advance to the next slide P

75. End of Program. Go to Part Four.

76. McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Part Four.

77. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-76

78. Target Return on Sales Pricing Target Return on Sales = 24% To calculate a price to achieve a profit that is a specific for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 FC+ ( UVC x Q ) Q( 1- Target Return on Sales ) x

79. Target Return on Sales Pricing Target Return on Sales = 24% To calculate a price to achieve a profit that is a specific for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 $30,000 + ( $42 x 1,800) ( 1-.24 ) x

80. Target Return on Sales Pricing Target Return on Sales = 24% To calculate a price to achieve a profit that is a specific for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 You will need to manually advance to the next slide $30,000 + 75,600 1,800( 1-.24 ) x

81. Target Return on Sales Pricing Target Return on Sales = 24% To calculate a price to achieve a profit that is a specific for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 You will need to manually advance to the next slide 105,600 1,800( 1-.24 ) x

82. Target Return on Sales Pricing Target Return on Sales = 24% To calculate a price to achieve a profit that is a specific for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 You will need to manually advance to the next slide 105,600 1,800.76 x

83. Target Return on Sales Pricing Target Return on Sales = 24% To calculate a price to achieve a profit that is a specific for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 You will need to manually advance to the next slide 105,600 1,368

84. Target Return on Sales Pricing Target Return on Sales = 24% To calculate a price to achieve a profit that is a specific for a wristwatch UVC = $42.00 FC = $30,000 Upper Limit Price = $78.00 Q = 1,800 You will need to manually advance to the next slide $77.19 $77.56 24.36%

85. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-84

86. Target Return on Investment

87. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600 Gross Margin (Net Sales – COGS)$ 64,800 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008 Less: Taxes$ 17,004 Net Profit After Taxes$ 17,004 Investment$250,000 Return on Investment 6.8%..

88. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%.

89. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%..

90. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%.

91. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%.

92. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%.

93. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%.

94. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%6.7%.

95. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investme$250,000 Return on Investment 6.8% $77.56 $78.34..

96. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56$78.34 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%6.7%.

97. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%6.7%.. $77.90 $78.34

98. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56$77.90 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608$140,220 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,864 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,864 Less: Taxes$ 17,004$ 16,932 Net Profit After Taxes$ 17,004$ 16,932 Investment$250,000 Return on Investment 6.8%...

99. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-98

100. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-99..

101. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-100

102. At-market price Above-market price Below-market price..

103. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-102

104. End of Program.

105. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600 Gross Margin (Net Sales – COGS)$ 64,800 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008 Less: Taxes$ 17,004 Net Profit After Taxes$ 17,004 Investment$250,000 Return on Investment 6.8% You will need to manually advance to the next slide...

106. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8% You will need to manually advance to the next slide..

107. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8% You will need to manually advance to the next slide...

108. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8% You will need to manually advance to the next slide..

109. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8% You will need to manually advance to the next slide..

110. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8% You will need to manually advance to the next slide..

111. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8% You will need to manually advance to the next slide..

112. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%6.7% You will need to manually advance to the next slide..

113. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investme$250,000 Return on Investment 6.8% You will need to manually advance to the next slide. $77.56 $78.34..

114. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56$78.34 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%6.7% You will need to manually advance to the next slide..

115. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%6.7% You will need to manually advance to the next slide... $77.90 $78.34

116. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56$77.90 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608$140,220 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,864 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,864 Less: Taxes$ 17,004$ 16,932 Net Profit After Taxes$ 17,004$ 16,932 Investment$250,000 Return on Investment 6.8% You will need to manually advance to the next slide....

117. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-116

118. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-117..

119. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-118

120. At-market price Above-market price Below-market price..

121. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-120

122. End of Program.

123. Closing slug

124. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600 Gross Margin (Net Sales – COGS)$ 64,800 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008 Less: Taxes$ 17,004 Net Profit After Taxes$ 17,004 Investment$250,000 Return on Investment 6.8%

125. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%

126. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%

127. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%

128. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%

129. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%

130. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%

131. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8% 6.7%

132. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56$78.34 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8%

133. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56$78.34 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8% 6.7%

134. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56$77.90 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,252 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,252 Less: Taxes$ 17,004$ 16,626 Net Profit After Taxes$ 17,004$ 16,626 Investment$250,000 Return on Investment 6.8% 6.7%

135. Upper-limit price $78Year 1Year 2 Price per unit (P) $77.56$77.90 Units Sold (Q)1,800 Unit Variable Cost (UVC) $42$42.42 Fixed Costs (FC)$30,000 Investment$250,000 State and Federal Taxes50% Net Sales (P X Q)$139,608$140,220 Less: Cost of Goods Sold (Q x UVC)$ 75,600$ 76,356 Gross Margin (Net Sales – COGS)$ 64,800$ 63,864 Less: Fixed Costs$ 30,000 Net Profit Before Taxes$ 34,008$ 33,864 Less: Taxes$ 17,004$ 16,932 Net Profit After Taxes$ 17,004$ 16,932 Investment$250,000 Return on Investment 6.8%

136. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-135

137. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-136

138. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-137

139. FIGURE 12-2 FIGURE 12-2 Four approaches for selecting an approximate price level 12-138

140. End of Program.