Share
Explore BrainMass

Calculating markup on price and cost

Mary Richards is a pricing manager of Caring Move, Inc., a local visiting nurse firm in the home care market. Richards has been asked to complete an analysis of profit margins for the firm. Unfortunately, her predecessor on this project was abruptly terminated, leaving only sketchy information on existing pricing practices.

A.Use the available data to complete the following table:
Hours of Marginal
Visiting Nurse Cost of Markup Markup
Care per day Price Service on cost on price
1 $20 $13 53.8% 35.0%
2 35 26 ---- ---
3 50 --- 28.2 ---
4 65 --- --- 20.0
5 --- 65 23.1 ---

B.Calculate the optimal markup on cost and optimal markup on price for each service, based on the following estimates of point price elasticity of demand;
Hours of Price Optimal Optimal
Visiting Nurse Elasticity Markup Markup
Care per day of demand, Ep on Cost, MOC on Price, MOP
1 -20.00
2 -10.00
3 -5.00
4 -1.50
5 -1.25

Attachments

Solution Preview

A)
Hours of Marginal
Visiting Nurse Cost of Markup on Markup
Care per day Price Service Cost on Price
1 20 13 53.80% 35%
2 35 26 34.62% 25.71%
3 50 39 28.20% 22.00%
4 65 52 25.00% 20%
5 80 65 23.10% ...

Solution Summary

Solution describes the calculations needed to find the missing values in first part of the problem. It calculates markup on price and cost in the second part.

$2.19