For each problem, clearly show and label your work.
1. Assume that TexCo is a widget manufacturer. It costs TexCo $55 (parts and labor) to manufacturer each unit, and it incurs fixed overhead of $3 million per year. If TexCo prices the widgets using a 40% markup on cost, how many widgets must it sell annually in order to break even? 5 points
2. If TexCo actually sells 170,000 units this year, what is its net profit? 5 points
3. Flip’s Flops, a small retailer located in South Padre Island, purchases “Sea Turtle” brand flip flops at a cost of $15 per pair. If the manager prices the flip flops using a 60% markup “on price”, what is the selling price to consumers? 5 points
4. Assume that it is nearing the end of the summer, and the Flip’s Flops still has a large number of “Sea Turtle” flip flops in the store. If the manager marks the price of the flip flops down by 40%, what is the new selling price of this item? 5 points
5. Peaks is a snowboard manufacturer, and is working on a new, high-end board to sell to retail stores. These boards will have a suggested retail price of $750. If Peaks knows that these retailers price their boards using a 50% markup on retail, and Peaks wants to be able to achieve a 60% markup on cost, what is the most that it can spend, per unit, to produce this board? 5 points