Question

I, Answer the question following the fact pattern:

A] Warehouse manager knows that the cold season has passed. He still has Winter items that he would like to sell. He offers to retailers:

- coats @75/ea; 40/15 net 30; Retailer purchases 10 coats on June 30th

-gloves @30/pair; 25/15; Retailer purchases 50 pairs of gloves on July 1st

- boots @140/pair 35/5; Retailer purchases 27 pairs of boots on July 5th

*** additional 7 and 1/2% for out of season purchase.

A] Having inspected the bought items Retailer notices that several of them are damaged:

- 3 of the coats; 8 pairs of gloves; 5 pairs of boots. On July 8th When Retailer returns to pay he notices a sign that reads: "All damaged items return for exchange only. If exchange not possible then refund at the per item purchase price". There are no more coats, 6 pairs of gloves are available, only 3 pairs of boots remain. What is Retailer's total bill?

II.   Company is ready to introduce its widget into the marketplace. Only one other comparable widget exists. That widget costs $28. However, Company's widget has several features that the other does not. Research has shown that at least 20% of potential purchasers would really appreciate these features. Company has decided that its widget price can range from $28 to $35. Company decides to sell its widget for $34.99. What pricing strategy (ies) has Company chosen? Explain.

Answer 1

I. Here, First lets see how many items of what category retailer has purchased after exchange/refund

	Coats (ea)	Gloves (pairs)	boots (pairs)
Number of items purchased	10	50	27
Less damaged goods	3	8	5
Add number of items exchanged	0	6	3
Final Purchase	7	48	25

Now lets calulcate the final Bill

	Coats (ea)	Gloves (pairs)	boots (pairs)	Total
Final Purchase (A)	7	48	25
Price of the item (B)	75	30	140
Total price (C = A *B)	525	1,440	3,500
Less Out of season discount	39.375	108	262.5
Putchase price (D)	486	1,332	3,238
Whether payment eligible for cash discount	no, since payment was to be paid in 15 days	Yes, since payment in 15 days	Yes, since payment in 5 days
Cash discount in % (E)	0	25%	35%
Less Cash discount in Value (D*E)	0	333	1133.125
Final payment	486	999	2,104	3,589

II. The Company is charging a high price compared to other product because of having a widget with unique features. These features doesnt exist in the market and is a competitive advantage to the company. The company is charging premium for those unique features. this type of pricing strategy is called as Price Skimming. In Price skimming strategy the company charges highest price the customers are willing to pay and later on decrease the price to attract price sensitive customers. this type of strategy is most commonly used in Flagship electronics.