Let's assume that Phil Young does develop and successfully market the Pedal Pusher product discussed in Problems 1 and 7. Phil's venture will purchase materials for making the product from others, assemble the products at the Pedal Pusher venture's facilities, and hire product sales representatives to sell the Pedal Pusher through local retail and discount stores that sell children's bicycles. The costs of plastic pedals and extensions; bolts, washers, and nuts; reflective material; and a microchip to provide the music when the bicycle is pedaled are expected to be $2.33 per pair of Pedal Pushers. Assembly costs are projected at $1.50 per pair. Shipping and delivery costs are estimated at $0.20 per pair, and Phil Young will have to pay commissions of $0.30 per pair of pedals sold by the sales representatives.
A. What will it cost to produce and sell a pair of Pedal Pushers?
B. What price will Phil Young have to charge for a pair of Pedal Pushers if he wants a "markup" of 50 percent on each sale? At what price would retailers have to sell a pair of Pedal Pushers if they, in turn, desired a "markup" before their expenses of 40 percent?
C. Now that Pedal Pushers is up and operating, Phil Young feels he should be paid a salary of $5,000 per month. Other administrative expenses will be $2,500 per month. How many units (pairs) of Pedal Pushers will the venture have to sell to cover all operating and administrative costs during the first year of operation?