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.
|
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
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