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Optimal Markup on cost and optimal markup on price

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Optimal Markup. Jerry Jones is a managing partner of Camden & Associates, Inc., a New York based management-consulting firm. Jones has asked you to complete an analysis of profit margins for Norton Inc., a client firm. Unfortunately, your predecessor on this project was abruptly transferred, leaving only sketchy information on the client's pricing practices.

A) Use the available data to complete the following table:

Price Marginal Markup on Markup on
Cost Cost Price

$1 $0.50 100% 50%
2 1.60 - -
5 - 400 -
10 - - 25
- 15.00 66.7 -

B) Calculate the optimal markup cost and optimal markup price for each product, based on the following estimates of the point price elasticity of demand:

Product Price Optimal Markup Optimal Markup
Elasticity of on Cost, MOC* on Price, MOP*
Demand

A -1.5
B -2.0
C -2.5
D -5.0
E -10.0

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Optimal Markup. Jerry Jones is a managing partner of Camden & Associates, Inc., a New York based management-consulting firm. Jones has asked you to complete an analysis of profit margins for Norton Inc., a client firm. Unfortunately, your predecessor on this project was abruptly transferred, leaving only sketchy information on the client's ...

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This post illustrates how to calculate the optimal markup on cost and optimal markup on price.

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