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?
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