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markup percentages

Karen is an acupuncturist with a busy practice. In addition to acupuncture services, Karen sells teas,herbal supplements, and rice-filled heating pads. Because Karen’s primary income is from acupuncture,she feels that she is providing the other items simply to fill a need and not as an important source of profits. As a matter of fact, the rice-filled heating pads are made by a patient who receives acupuncture for them instead of paying cash. The rice-filled pads cost Karen $5.00, $8.00, and $12.00, respectively, for small, medium, and large sizes. The ginger tea, relaxing tea, cold & flu tea, and detox tea cost her $2.59 per box plus $5.00 shipping and handling for 24 boxes. Karen uses a cost plus markup method, whereby she adds the same set amount to each box of tea. She figures that each box costs $2.59 plus $0.21 shipping and handling, which totals $2.80, then she adds $0.70 profit to each box and sells it for $3.50. Do you think this is a good pricing strategy? How would it compare to marking up by a percent- age of the cost?
What prices should Karen charge (using the markup percentage) to obtain the same amount of profit as she did with the cost plus method? Do not incl
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1 Answer

This is a perfect example of how using Excel or other spreadsheet effectively can show you many answers to budgetary and bottom dollar concerns.  Let me know if I can be of further assistance to setting up a spreadsheet to run the numbers for you.