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%

2.

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

3.

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

4.

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

5.

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 2 years ago
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