FMM 225 Module Five Basic Markup Equations for Merchandising Decisions

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 #DIV/0! estimated expenses price reductions profit initial $ markup 0 planned sales price reductions original retail price 0 markup original retail price initial markup % #DIV/0! 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 $ #DIV/0! 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 $ cumulative retail $ cumulative markup % #DIV/0! cost retail markup % Opening inventory 0 $0.00 Purchases STD 0 $0.00 Total Merchandise Handled 0 $0.00 cumulative markup 0 cumulative markup% #DIV/0! 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 0 GROSS MARGIN % #DIV/0! MAINTAINED MARGIN % #DIV/0! 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%

Initial markup 54.5% Expenses 34.0% Markdowns 12.0% Workroom costs 6.0% Shortages 0.8% Total Reductions -7.3% MMU % 107.30000% IMU % 45.5% MMU % 39.0% Net Sales % 100.0% Reduction % 61.0% Average Cost a. What is the maximum total cost the buyer can pay for the balance of the total purchase? Units Retail Total Retail MU % 8,600 $7.50 $64,500 60.0% $36,140 Units Cost Placed 4,400 $3.25 $14,300 Cost Balance 4,200 5.20 $21,840 Cost Balance Unit Balance Cost Balance Avg. Cost 4,200 $21,840 $5.20 Cost Planned Retail Planned MU % $5,650.00 $10,000.00 43.5% Cost Placed $2,875.50 Cost Balance $2,774.50 Average Retail Practice Problems Units Cost Total Cost MU % Maxi 165 $39.00 $6,435 Tuni 85 $28.00 $2,380 $8,815 55.5% $19,809 Retail Placed Total Retail Maxi 165 $85.00 $14,025 Retail Balance Retail Various Pricing Strategies (list at least two) Tunic 85 $5,784 $68.05 1 Cost Plus Pricing 2 Penetration Pricing Average Markup 3 Price Skimming 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? 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. Cost Purchases Planned b. What will be the average cost per pair for the socks (4,200 socks) yet to be purchased? 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? 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? Total Retail Planned

Retail Planned MU % Cost Planned MU $ MU % $95,000 54.0% $61,688 64.935064935 B & C order placed $12,500 $5,975 $82,500 $55,713 $26,787 67.5% 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?