The firm also sells directly to large construction companies, often creating friction with the plumbing wholesalers. Because there are several manufacturers who produce to the same specifications, price competition is often intense.
Consider the following situation. Tricon
Piping Systems manufactures small diameter potable polyethylene water pipe and achieves distribution primarily through plumbing wholesalers. The firm also sells directly to large construction companies, often creating friction with the plumbing wholesalers. Because there are several manufacturers who produce to the same specifications, price competition is often intense. The salesperson for Tricon recently offered a price concession to capture an order. Here are the specifics. The salesperson bid a job at $14,275 (list price). Tricon endeavors to sell at list price, and enjoys a 39% gross margin on the pipe in question at list price. In order to gain the “business” and to secure her commission, the salesperson offered the customer a 12% price discount. Calculate the percent change (+/-) in gross margin. Report your answer as a percentage and round to the nearest percent.
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