Instructions
This problem is about pricing through a channel of distribution. The product is shoes. The total landed cost to the importer is $20 for a pair of shoes (to their warehouse from any manufacturer around the globe). You need to determine the selling price, the mark up in dollars and the margin (mark up expressed as a percent of cost or selling price depending upon what was desired) for each member of the distribution channel. Here is how each member of the channel prices shoes:
1. The importer wants a 50% mark up on the landed cost for each pair of shoes. the importer sells to the wholesaler.
2. The wholesaler wants a 25% mark up on their cost. The wholesaler buys shoes from the importer and sells to the retailer.
3. The retailer wants a mark up of 50% on the retailer's selling price. the retailer buys from the wholesaler and sells to people who shop at their store in the local mall.
4. How much the household shopper pay for a pair of shoes?
Now the retailer has a 20% return rate on shoes. So what is the retailers effective selling price, mark up and margin on each pair of shoes sold