# Carol Vessey Current Pricing Practices: Optimal Markup on Cost and Price

Carol Vessey is a managing partner of Dry Air, Inc., a New Orleans-based dehumidifier-systems distribution firm. Vessey has been asked to complete an analysis of profit margins for the firm. Unfortunately, her predecessor on this project was abruptly transferred, leaving little information on the firm's current pricing practices.

A. Use the available data to complete the following table. (COPY AND PASTE THE TABLE TO YOUR WORD DOCUMENT.)

https://brainmass.com/business/finance/carol-vessey-current-pricing-practices-optimal-markup-cost-390419

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** Complete solution in the attached Word document.

Carol Vessey is a managing partner of Dry Air, Inc., a New Orleans-based dehumidifier-systems distribution firm. Vessey has been asked to complete an analysis of profit margins for the firm. Unfortunately, her predecessor on this project was abruptly transferred, leaving little information on the firm's current pricing practices.

A. Use the available data to complete the following table. (COPY AND PASTE THE TABLE TO YOUR WORD DOCUMENT.)

Model Price Marginal Cost Markup on Cost Markup on Price

220 $200 $ 120 66.7% 40.0%

440 375 200 87.5 46.7

660 600 500 20.0 16.7

880 900 600 50.0 33.3

1,000 1,200 1,000 20.0 16.7

B. Calculate the optimal markup on cost and optimal markup on price for each model, based on the following estimates of the point price elasticity of demand. (COPY AND PASTE THE TABLE TO YOUR WORD DOCUMENT.)

Model Price Elasticity of Demand, e P Optimal Markup on Cost, MOC* Optimal Markup on Price, MOP*

200 - 2 100% 50%

440 - 3 50.0 33.3

660 - 4 33.3 25.0

880 - 5 25.0 20.0

1,000 - 10 11.0 10.0

https://brainmass.com/business/finance/carol-vessey-current-pricing-practices-optimal-markup-cost-390419