markup excecl problem
bahlman2
Bahlman_Chapter_6_Markup_Problem_Start.xlsxProblem
| Markup Problem | |||||
| Casey's General Stores is a chain of convenience stores along with gas stations that was based in Ankey, IA and now has convenience marts all over the midwest. In small towns, there may only be 1 or two gas stations; however, in larger towns many gas stations compete with each other. One signature of gas stations is that prices per gallon are displayed on large signs making it easy for customers to compare prices and select the cheapest station. Many chains, like Casey's, have very loyal customers so when they have slightly higher prices, they don't lose all business. Suppose you are in charge of pricing products at a convenience store similar to Casey's in a larger town with a number of gas stations and convenience marts. You are provided with the elasticity and marginal cost information. | |||||
| a) | Using the markup rule, determine the price you should charge for each product. | ||||
| Product | Price Elasticity | MC | Price | ||
| Gasoline | 4.00 | $2.10 | |||
| Quarts of Oil | 1.10 | $0.50 | |||
| Bottled Water | 1.20 | $0.25 | |||
| Bottled Soda | 1.50 | $0.75 | |||
| Ice Cream Bars | 2.00 | $1.00 | |||
| Chips | 2.25 | $1.25 | |||
| Cheeseburgers | 2.75 | $2.00 | |||
| Pizza | 3.00 | $1.50 | |||
| b) | The price elasticity of demand for gasoline purchased from your store is high (as opposed to the gasoline as a good in the global market). Which of the following acceptable answers is the likely cause of this elasticity? | ||||
| Gasoline from your store | |||||
| с) | What is the relationship between elasticity and the amount of markup a firm can place on a product? | ||||
Instructions
| Project Description: In this problem, you will calculate the prices for products at a convenience store using the markup rule. You will determine the reason for the high price elasticity of gasoline and the relationship between elasticity and the amount of the markup. | ||
| For the purpose of grading the project you are required to perform the following tasks: | ||
| Step | Instructions | Points Possible |
| 1 | Start Excel. | 0 |
| 2 | In cell F7, by using cell references, calculate the price using the markup rule. Use cells D7 and E7. Copy the formula from cell F7 down the column to cell F14. | 1 |
| 3 | In cells E16-F16, determine the likely cause of the high price elasticity of gasoline purchased from your store. | 1 |
| 4 | In cell C18, determine whether the relationship between elasticity and the amount of the markup is positive, negative, or there is no relationship. | 1 |
| 5 | Save the workbook. Close the workbook and then exit Excel. Submit the workbook as directed. | 0 |
