t research suggests that, to remain competitive with other products on the market, the base model SmartWave should be priced at just under $100 retail. A figure of $99.00 each has been established by the board as the retail price of the SmartWave. With production costs at $50.82 each in 100,000 unit production lots, this reflects a $48.18 total profit across all levels of distribution. Approximately $13.47, or 28% of this total profit is allocated to wholesale distribution outlets and factory operations, leaving $34.71 net profit at the retail level, or $62.09% based on a wholesale cost of $55.90. This is slightly higher than most competitive products, a factor in reducing the risks associated with an unproven product concept and in motivating sales within the retailers organization.4.2.3 Wholesale Pricing and Profit MarginsWholesale distribution outlets typically operate on lower profit margins than retail outlets, since they have lower overall operating costs and reduced levels of risk exposure due to the assumption of these risks, for the most part, by the manufacturer. Research has shown that a 15% profit margin for the wholesaler is typical for this type of product. This means that wholesalers will gross $7.29 on each SmartWave sold.4.2.4 Net Profit for SmartWave, Inc.After allocating $34.71 profit at the retail level and $7.29 at the wholesale level, as described above, $6.18 remains to be divided between SmartWave, Inc. and its independent sales representatives. This reflects a net profit margin of 12.16% based on a total production cost of $50.82.4.3 Shipment EstimatesMaterials, labor, and machinery for packaging SmartWave products for shipment will be allocated to the cost basis for the SmartWave product at the factory level. In other words, the factory cost of each SmartWave product includes all such cost elements. Actual cost of shipping, i.e. the price paid to the commercial carrier for shipment of the product to it...
