Question

In: Accounting

1. A department’s maintained markup is 38 percent, reductions are $560, and net sales are $28,000....

1. A department’s maintained markup is 38 percent, reductions are $560, and net sales are

$28,000. What’s the initial markup percentage?

2. Maintained markup is 39 percent, net sales are $52,000, and reductions are $2,500. What are

gross margin in dollars and the initial markup as a percentage? Explain why initial markup is

greater than maintained markup.

3. The cost of a product is $150, markup is 50 percent, and markdown is 30 percent. What’s the

final selling price?

4. Manny Perez bought a tie for $9 and priced it to sell for $15. What was his markup on the tie?

5. Answer the following:

(a) The Limited is planning a new line of leather jean jackets for fall.

It plans to retail the jackets for $100. It is having the jackets produced in the Dominican

Republic. Although The Limited does not own the factory, its product development and

design costs are $400,000. The total cost of the jacket, including transportation to the stores,

is $45. For this line to be successful, The Limited needs to make $900,000 profit. (A). What

is its break-even point in units and dollars?

(b) The buyer has just found out that The GAP, one of The Limited's major competitors, is

bringing out a similar jacket that will retail for $90. If The Limited wishes to match The

GAP's price, how many units will it have to sell?

Solutions

Expert Solution

1. 41%

Selling price	28000
Mark downs	560
Selling price before markdowns	28560
Maintained markup	38%
Cost (28,000 / 138%)	20290
Initial markup = (28,560 - 20,290)	8270
Initial markup % (8,270 / 20,290)	41%

Gross margin

14590

Initial markup %

46%

Working:

Selling price	52000
Mark downs	2500
Selling price before markdowns	54500
Maintained markup	39%
Cost (52,000 / 139%)	37410
Initial markup = (54,500- 37,410)	17090
Initial markup % (17,090/37,410)	46%

Gross margin (52,000 - 37,410)	14590

Final selling price

$157.50

Working:

Cost	$150.00
Mark-up	50%
Price after mark up (150 + 50% of 150)	$225.00
Mark down	30%
Price after mardkown (225 - 30% of 225)	$157.50

Purchase price	9
Sales price	15
Mark up (15 - 9)	6
Matk up % (6 / 9) * 100	66.7%

Break-even sales - units	8909
Break-even sales - dollars	890900

Working:

Selling Price	$100
cost of the jacket	$45
Contribution margin	$55
Fixed costs	400000
Desired profit	90000

Break-even sales - units(400,000+90,000)/55	8909
Break-even sales - dollars (8,909 x 100)	890900

ekkarill92 answered 1 year ago

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