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Module Five Basic Markup Equations Used for Merchandising Decisions
Correct formula and answer
Initial Markup Concept One or more formula errors
Wrong formula or no formula
1. A men’s swim buyer determines that the department has net sales of $875,000, expenses of $345,000, and total reductions of $95,000. This buyer also wants to attain a net profit of 4.5%. Find the initial markup percentage.
Net sales $875,000
Expenses $345,000
Reductions $95,000
Net profit-4.5%
IMU %
Calculating Initial Markup
2. A retailer in a boutique jewelry store has estimated expenses of 49%, markdowns at 15%, and stock shortage at 6.3%. A profit of 4% is desired. Calculate the initial markup percentage required.
Markdowns 15.0%
Expenses 49.0%
Shortage 6.3%
Profit 4.0%
IMU %
Cumulative Markup
3. A sleepwear buyer has an opening stock figure of $170,000 at retail, which carries a 61% markup. On March 31, new purchases since the start of the period were $990,000 at retail, carrying a 63% markup. Find the cumulative markup percentage on merchandise handled in this department to date.
Cost Retail MU % MU $
Opening inventory $70,200 $170,000 61.0%
+ New Purchases $346,500 $990,000 65.0%
TMH
4. A belt department had an opening inventory of $86,000 at retail, with a 56.8% markup. Purchases during November were $63,000 at cost and $142,000 at retail. Determine:
a. The cumulative markup percentage Cost Retail MU % MU $
Opening inventory $37,152 $86,000 56.8%
New purchases $63,000 $142,000
b. The markup percentage on new purchases
Cost Retail MU $ MU %
$64,000 $142,000
Maintained Markup
5. A sporting goods store has an initial markup of 54.5%. The expenses are 34%. Markdowns are 12%. The cost of assembling bicycles and so on (e.g., workroom costs) is 6%, and shortages are 0.8%. What was the maintained markup percentage?
Initial markup 54.5%
Expenses 34.0%
Markdowns 12.0%
Workroom costs 6.0%
Shortages 0.8%
Total Reductions
MMU %
6. The men’s shorts department buyer determined that the department’s initial markup should be 45.5%. The buyer also wanted to attain a maintained markup of 39%. Under this plan, what retail reduction (in percentage) would be allowed?
IMU % 45.5%
MMU % 39.0%
Net Sales % 100.0%
Reduction %
Average Cost
7. A buyer plans to purchase 8,600 pairs of socks for a pre-Christmas sale. The unit retail price is planned at $7.50, and the markup goal for the purchase is 60%. The buyer purchases 4,400 pairs at the Sock Company showroom at a cost of $3.25 each.
a. What is the maximum total cost the buyer can pay for the balance of the total purchase?
Units Retail Total Retail MU % Cost Purchases Planned
8,600 $7.50 60.0%
Units Cost Placed Total Cost
4,400 $3.25
Cost Balance Cost Balance
b. What will be the average cost per pair for the socks (4,200 socks) yet to be purchased? Unit Balance Cost Balance Avg. Cost
4,200 $0
8. A buyer who needs $10,000 worth of merchandise at retail for a housewares department has written orders for $2,875.50 at cost. The planned departmental markup percentage is 43.5%. How much (in dollars) is left to spend at cost? Cost Planned Retail Planned MU %
$10,000.00 43.5%
Cost Placed
$2,875.50
Cost Balance
Average Retail Practice Problems
9. An dress buyer confirms an order reading as follows: a. 165 maxi dresses costing $39 each b. 85 tunics costing $28 each If a retail price of $85 is placed on the maxi dresses, and a markup average of 55.5% is sought, what retail price must the tunics carry? Units Cost Total Cost MU % Total Retail Planned
Maxi 155 $39.00
Tuni 85 $28.00
55.5%
Retail Placed Total Retail
Maxi 155 $85.00
Retail Balance Retail Various Pricing Strategies (list at least two)
Tunic 85
Average Markup
10. A suit buyer who plans sales of $95,000 at retail during April has an average markup goal of 54%. An order is placed with the B&C Sportswear Company for April delivery in the amount of $5,975 at cost and $12,500 at retail. What markup percentage must be made on the balance of the April purchases to achieve the planned markup? Retail Planned MU % Cost Planned MU $ MU %
$95,000 54.0%
B & C order placed $12,500 $5,975
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