FMM 225 Module Five Basic Markup Equations for Merchandising Decisions - RVasquez

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 345000 price reductions 95000 profit 875000 initial $ markup 1315000 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 CA 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 han 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 % #DIV/0! 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%

Initial Markup Concept Net sales $875,000 Expenses $345,000 Reductions $95,000 Net profit-4.5% $39,375 IMU % 49.4% Calculating Initial Markup Markdowns 15.0% Expenses 49.0% Shortage 6.3% Profit 4.0% IMU % 278.4% Cumulative Markup Cost Retail MU % MU $ Opening inventory $70,200 $170,000 61.0% $99,800 + New Purchases $346,500 $990,000 65.0% $643,500 TMH $416,700 $1,160,000 64.1% $743,300 a. The cumulative markup percentage Cost Retail MU % MU $ Opening inventory $37,152 $86,000 56.8% $48,848 New purchases $63,000 $142,000 55.6% $79,000 $100,152 $228,000 56.1% $127,848 b. The markup percentage on new purchases Cost Retail MU $ MU % $64,000 $142,000 $78,000 54.9% Maintained Markup Initial markup 54.5% Expenses 34.0% Markdowns 12.0% Workroom costs 6.0% Shortages 0.8% Total Reductions 52.8% MMU % 3.73626% IMU % 45.5% MMU % 39.0% Net Sales % 100.0% Reduction % 11.9% 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% $38,700 Units Cost Placed Total Cost 4,400 $3.25 $14,300 Cost Balance $24,400 Cost Balance Unit Balance Cost Balance Avg. Cost Used for Merchandising Decisions 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. percentage required. this department to date. markup percentage? be allowed? a cost of $3.25 each. Planned

4,200 $24,400 $5.81 Cost Planned Retail Planned MU % $4,350.00 $10,000.00 43.5% Cost Placed $2,875.50 Cost Balance $1,474.50 Average Retail Practice Problems Units Cost Total Cost MU % Maxi 155 $39.00 $6,045 Tuni 85 $28.00 $2,380 $8,425 55.5% $18,933 Retail Placed Total Retail Maxi 155 $85.00 $13,175 Retail Balance Retail Various Pricing Strategies (list at least two) Tunic 85 $5,758 $67.74 Average Markup Retail Planned MU % Cost Planned MU $ MU % $95,000 54.0% $43,700 B & C order placed $12,500 $5,975 $82,500 $37,725 $44,775 54.3% left to spend at cost? Planned