George Constanza is a project coordinator at Kramer-Seinfeld & Associates, Ltd., a large Brooklyn-based painting contractor. Constanza has asked you to complete an analysis of profit margins earned on a number of recent projects. Unfortunately, your predecessor on this project was abruptly transferred, leaving you with only sketchy information on the firm's pricing practices.
A. Use the available data to complete the following table:
|
Price
|
Marginal Cost
|
Markup on Cost (%)
|
Markup on Price (%)
|
|
$100
|
$25
|
300.0
|
75.0
|
|
240
|
72
|
|
|
|
680
|
272
|
150.0
|
60.0
|
|
750
|
|
100.0
|
|
|
2,800
|
|
|
40.0
|
|
|
2,700
|
33.3
|
|
|
|
3,360
|
|
20.0
|
|
5,800
|
|
|
10.0
|
|
6,250
|
|
5.3
|
|
|
|
10,000
|
|
0.0
|
B. Calculate the missing data for each of the following proposed projects, based on the available estimates of the point price elasticity of demand, optimal markup on cost, and optimal markup on price:
|
Project
|
Price Elasticity
|
Optimal Markup on Cost (%)
|
Optimal Markup on Price (%)
|
|
1
|
-1.5
|
200.0
|
66.7
|
|
2
|
-2.0
|
|
|
|
3
|
|
66.7
|
|
|
4
|
|
|
25.0
|
|
5
|
-5.0
|
25.0
|
|
|
6
|
|
11.1
|
10.0
|
|
7
|
-15.0
|
|
|
|
8
|
-20.0
|
|
5.0
|
|
9
|
|
|
4.0
|
|
10
|
-50.0
|
2.0
|
|
|
|
|
|
|