Basic Markup Equations

UNIT III THE RELATIONSHIP OF MARKUP TO PROFIT I TYPES OF MARKUP

A. Initial Markup Concepts dollars %

original or first retail price billed cost of merchandise initial markup 0

estimated expenses price reductions profit initial $ markup 0

planned sales price reductions original retail price 0

markup original retail price initial markup %

B. Calculating Initial Markup

1. finding initial MU% when gross margin % and retail reduction % are known gross margin % retail reductions % sales (100%) 100.00% initial markup % 0.00%

2. Finding initial MU % when gross margin and retail reductions in $ are known gross margin $ retail reductions $ sales $ initial markup $

3. Finding initial MU% when cash discounts and alteration costs are known gross margin % alteration costs % cost discount earned % retail reductions% sales % 100.00% initial markup % 0.00%

C. Cumulative Markup cumulative markup $

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cumulative retail $ cumulative markup %

cost retail markup % Opening inventory 0 $0.00 Purchases STD 0 $0.00 Total Merchandise Handled 0 $0.00

cumulative markup 0 cumulative markup%

D. Maintained Markup

GROSS MARGIN CALCUATION cost retail MAINTAINED MARGIN CALCUATION NET SALES $0.00 NET SALES cost of goods sold cost of goods sold new purchases new purchases inward freight inward freight Total merchandise handled 0 Total merchandise handled closing inventory closing inventory Gross Cost of Merchandise 0 Gross Cost of Merchandise cash discounts earned Net Cost of Merchandise Sold 0 alteration/workman costs Total Cost of Merchandise Sold 0 $0.00

GROSS MARGIN $0.00 MAINTAINED MARGIN GROSS MARGIN % MAINTAINED MARGIN %

1. Finding Maintained MU when Initial MU and Retail Reductions are known Initial Markup % Retail Reduction % Maintained Markup% 0.00%

2. Finding Retail Reduction when Initial MU and Maintained MU are known Initial Markup % Maintained Markup % Retail Reduction % 0.00%

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Module Five Basic Markup Equations Used for Merchandising Decisions

Initial Markup Concept

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

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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%

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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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Correct formula and answer

One or more formula errors

Wrong formula or no formula

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