b. FertilGrow believes that it cannot charge customers the full value to the customer.Instead they plan to set the price at half the value to the customer (price =0.5*VTC). They can produce the fertilizer for $500/ton. They incurred a total ofS100,000 in research & development (R&D) costs to develop the fertilizer andbring it to market. FertilGrow has also incurred an additional $200,000 in R&Dcosts for an unrelated product.i. What % markup is FertilGrow considering? ,ii. What % margin is FertilGrow considering?iii. At this price, what quantity will they need to break even?

Solution: Price = 0.5* VTC Price = $500 + 0.5*$500 = $750 (i).Markup = (750-500)/500×100 =…

Answered: b. FertilGrow believes that it cannot…

b. FertilGrow believes that it cannot charge customers the full value to the customer. Instead they plan to set the price at half the value to the customer (price =

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.

Question

b. FertilGrow believes that it cannot charge customers the full value to the customer.
Instead they plan to set the price at half the value to the customer (price =
0.5*VTC). They can produce the fertilizer for $500/ton. They incurred a total of
S100,000 in research & development (R&D) costs to develop the fertilizer and
bring it to market. FertilGrow has also incurred an additional $200,000 in R&D
costs for an unrelated product.
i. What % markup is FertilGrow considering? ,
ii. What % margin is FertilGrow considering?
iii. At this price, what quantity will they need to break even?

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