Question

In: Accounting

Fiberia Accessories, a clothing retailer, is planning to introduce a new line of sweaters as part...

Fiberia Accessories, a clothing retailer, is planning to introduce a new line of sweaters as part of the winter collection for $65 with an inventory of 1500. The main selling season is 60 days between November and December. The store then sells the remaining units in a clearance sale at 65 percent discount. Out of the 60 main retail days, Fiberia sells the sweaters at full retail price for only 45 days, while giving a discount of 25 percent for the remaining 15 days. The demand functions a, and b are given as 79.5 and 1.1 respectively.

Marked Down Pricing Model for Fiberia Accessories's new sweater

Data

Retail Price	$65
Inventory	1500
Selling Season (days)	60
Days at Full Retail	45
Intermediate Markdown	25 percent
Clearance Markdown	65 percent
Demand Function
A	79.5
B	1.1

1. What is the average daily sale during the full retail sales period?

A. 33.33

B. 15

C. 24.55

D. 8

2. Calculate the total revenue during the full retail sales period.

A. $23,400

B. $2,880

C. $16,200

D. $17,550

3. Calculate the total units sold during the discount sales period.

A. 388.13

B. 133.3

C. 39.28

D. 25.88

4. Calculate the revenue for the clearance sales period.

A. $17,105.16
B. $18,921.09
C. $23,400
D. $48,871.88

Solutions

Expert Solution

Solution 1:

Demanad function per day = a - bx = 79.5 - 1.1x

Where x is selling price per unit.

Selling price in full retail sales period = $65

Average daily sales during full retail sales period = 79.5 - 1.1*65 = 8 Sweaters

Solution 2:

Period of full sales retail period = 45 days

Total revenue during full sale retail period = Per day sale * Nos of days * selling price per unit = 45*8*65 = $23,400

Solution 3:

Price in discount sales period = 65*75% = $48.75

Demand during discount sales period = 79.5 - 1.1*48.75 = 25.875 per day

Nos of days of discount sales period = 15 days

Total unit sold in discount sales period = 25.875*15 = 388.125 = 388.13 (round off)

Solution 4:

Total inventories of sweater =1500

Sales during 60 days of season = 360 + 388.125 = 748.125

Sales during clearance sale = 1500 - 748.125 = 751.875

Selling price during clearance sale = 65*35% = $22.75

Total revenue during clearance sale = 751.875 * 22.75 = $17,105.16

ekkarill92 answered 9 months ago

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