Question

1. Summit earns $10,000 a year in slotting fees from record manufacturers to stock their albums. Their annual gross margin on albums is $379,000. Warehouse costs are $12,000 per year. Vinyl albums take up 68% of their warehouse space. They have store direct costs of $9,000. What is their adjusted gross margin on albums?

2. What are their direct product costs?

​​​​​​​3. What is their Direct Product Profitability (DPP)?

Answer 1

1	Adjusted Gross Margin on Albums :-
	Annual Gross Margin		$379,000
	Less:- Direct costs		$9,000
			$370,000
	Less:- Slotting Fees		$10,000
	Adjusted Gross Margin on Albums :-		$360,000
2	Direct Product Costs
	A direct cost is a price that can be directly tied to the production of specific goods or services.
	A direct cost can be traced to the cost object, which can be a service, product, or department.
	Direct costs are often variable costs, meaning they fluctuate with production levels such as inventory.
3	Direct Product Profitabiity:-
	Annual Gross Margin		$379,000
	Less:- Direct costs		$9,000
			$370,000
	Less:- Slotting Fees		$12,000
	Direct Product Profitabiity:-		$358,000