Questions -

1. Acme explosives expects to sell 125,000 sticks of dynamite in 2016 to Wily E. Coyote Inc. Total fixed costs are $750,000 and total variable costs are $900,000. They want a markup of 65%. What price should they charge for a stick of dynamite?

2. Read the section on the psychology of pricing. Consider your typical department store where products are seemingly never sold at the "list price".

2a. Bruce goes to Macy's and sees a pair of jeans he likes. The list price is $75 but they are on sale for $35.

Using what you learned about the psychology of pricing, explain if Bruce is getting a good deal or not. How can the store make their profit margin with such a large markdown?

2b. Bruce buys the jeans. Did he save money?