Assume that you are the V.P. of marketing for a firm that produces refrigerated prepared pasta dishes for sale to consumers through various retail channels. You are considering producing a new line of all-natural one-serving pasta dishes. Your research suggests that consumers would only be willing to buy the pasta if the price is less than $6.00 per package.
You will be selling the pasta through specialty food brokers who will distribute to natural food stores that will sell to consumers. The natural food stores require a 30 percent retailer margin and the brokers require a 20 percent wholesaler margin.
a. Assuming the natural food stores will sell the product for $5.99 per package, what price will the specialty food brokers charge the food stores for the product?
b. What price will the manufacturer charge the specialty food brokers?
c. If the manufacturer costs are $0.95 per package, what will the manufacturer's contribution per unit be?