Question

In: Finance

Central Ski and Cycle purchased ski boots for $360 per pair less discounts of 30% and...

Central Ski and Cycle purchased ski boots for $360 per pair less discounts of 30% and 10%. The regular rate of markup on selling price is 40%. The store’s operating expenses are 22% of the regular selling price. During a January clearance sale, the price was reduced to $270 per pair.

a)      What was the cost of the boots to the store after both discounts? (0.5 mark)

b)      What was the regular selling price?

c)      What were the store’s overhead expenses? (0.5 mark)

d)      What was the discount during the January clearance sale in dollars? (0.5 mark)

e)      What was the rate of markdown for the January clearance sale? (0.5 mark)

f)       What was the reduced profit on each pair of boots at the sale price? (1 mark)

g)      What was the reduced markup at the sale price in dollars? (0.5 mark)

h)      What was the rate of markup on cost at the sale price? (0.5 mark)

Solutions

Expert Solution

a) What was the cost of the boots to the store after both discounts?

Central Ski and Cycle for purchased ski boots-

=$360-30%-10%

=$226.8

b) What was the regular selling price?

Company wants to sell them at advertised price i.e $360. If they want to clearance sale in January then the price was reduced to $270 per pair.

So, selling price is-

=$270*1.40

=$378

c) What were the store’s overhead expenses?

22% overhead expenses come off the selling price $378-

=$378*22%

=$83.16

d) What was the discount during the January clearance sale in dollars?

=$270-30%-10%

=$170.1

e) What was the rate of markdown for the January clearance sale?

=$360-$270/$360

=25%

f) What was the reduced profit on each pair of boots at the sale price ?

={($360*1.4 - $226.8)-$360*1.4*22%-($378-226.8-89.16)}

=$166.32-$75.16

=$91.16

g) What was the reduced markup at the sale price in dollars?

=($504-226.8)-($378-226.8)

=$126.6

h) What was the rate of markup on cost at the sale price?

Rate of markup on cost=(Sale price -Unit cost/Unit cost)

Rate of markup on cost= ($378-226.8/226.8)

  Rate of markup on cost= 66.66%


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