Question

Wholesale is the cost of a good sold between businesses, and retail sale is the cost of goods sold to the consumer. Use the following assumptions to make your calculations: Monica spends $40 dollars on supplies and 4 hours at $12.00 per hour to construct a dress. She wants to make a 60% profit on the wholesale price (calculate by adding the cost of production to the profit margin [60%]). Retail will increase that wholesale cost by 50%. Write a paragraph justifying the costs and a rationale for whether customers will want to buy the dress at that cost. Compose a profile of the projected buyer and consider some ways to lower the retail sale price.

Answer 1

Monica's dress costs $140.80 wholesale with a 60% profit margin and retails at $211.20 after a 50% markup. The targeted market is consumers who value handcrafted clothing and are willing to pay for uniqueness and quality. Strategies to lower the retail price include reducing the profit margin, finding cheaper supplies, or improving efficiency.

Step-by-step explanation:

To calculate the wholesale price of the dress Monica is making, we first need to determine the cost of production. Monica spends $40 on supplies and 4 hours making the dress at $12.00 per hour for labor. This results in a labor cost of $48 (4 hours × $12.00). The total cost of production is therefore $40 + $48 = $88. To make a 60% profit on the wholesale price, we add 60% of $88 to the cost of production (0.60 × $88 = $52.80). The wholesale price of the dress is thus $88 + $52.80 = $140.80.

The retail price will be 50% higher than the wholesale price. Therefore, the retail price is 1.50 × $140.80 = $211.20. Monica's dress appears to be aiming for a market of consumers who value handcrafted clothing and are willing to pay a premium for such unique pieces. Depending on the law of supply and demand, as well as competition, Monica might have to adjust her prices. If the dress is unique, well-made, and fashion-forward, and if Monica targets the right consumer base that appreciates these qualities, customers might indeed be willing to buy the dress at this cost.

To lower the retail sale price, Monica could reduce her profit margin, find cheaper supplies, or become more efficient in production to reduce the number of hours required to make a dress. However, she should ensure that these changes do not compromise the quality of her dresses, as this may affect consumer demand.

Profile of Projected Buyer: Someone who values unique, handmade items and is willing to invest in higher-quality, boutique apparel.

Answer 2

The wholesale price of Monica's handmade dress, including a 60% profit margin, is calculated to be $140.80, leading to a retail price of $211.20. Customer willingness to purchase at this price depends on several market factors. Possible solutions to reduce the price could involve cheaper materials, better efficiency, or margin adjustments.

Step-by-step explanation:

The total cost of Monica producing the dress is the sum of the cost for supplies ($40) and the labour cost (4 hours at $12.00 per hour, which totals $48), amounting to $88. To determine the wholesale price, we add a 60% profit margin, which is $52.8 ($88 * 60%). Thus, the wholesale price of the dress is $140.80 ($88 + $52.8). The retail price is increased by 50% from the wholesale price, bringing the retail price to $211.20 ($140.80 * 150%). Monica's dress pricing is justifiable considering the labour, material costs, and desired profit margin. However, whether customers will be willing to buy the dress at this cost depends on factors like the quality of the dress, the brand value, and the target market's purchasing power. To attract customers, Monica will need to focus on a projected buyer profile, likely someone who values handcrafted clothing and is willing to pay a premium for quality and exclusivity. To reduce the retail price, Monica could either source cheaper materials, work more efficiently to reduce labour hours, or adjust her profit margin, keeping in mind the laws of supply and demand, and competition, which may necessitate such changes.