FI 515 Retail Week 9

FI 515 Retail Week 9 - 1. Maintained markup is 39%, net...

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1.  Maintained markup is 39%, net sales are \$52000, and reductions are \$2500.  What are  the gross margin in dollars, and the initial markup as a percentage?  Explain why initial  markup is greater than maintained markup. Cash discount = COGS x 2%, where COGS = Net sales – maintained markup Cash discount =  \$52,000 – (\$52,000 x 0.39) Cash discount = \$31,720 Cash discount = \$31,720 x 2% = \$634.40 Gross margin (GM) = Maintained markup + Cash discounts - Alterations GM = (\$52,000 x 0.39) + \$634.40 - \$1,700 GM = \$20,280 + \$634.40 - \$1,700 GM = \$19,214.40 Initial markup (IM) = (Maintained markup + Reductions) ÷ (Net sales +  Reductions) Reductions = 500 + 5,000 + 2,000 = \$7,500 IM = (\$20,280 + \$7,500) ÷ (\$52,000 + \$7,500) IM = \$27,780 ÷ \$59,500 IM = 0.467 or 46.7% The initial markup is greater than the maintained markup because the retailer must  initially markup merchandise high enough to achieve the planned maintained markup after the

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This note was uploaded on 04/24/2012 for the course FI 515 taught by Professor Mikewoodard during the Spring '11 term at DeVry Houston.

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FI 515 Retail Week 9 - 1. Maintained markup is 39%, net...

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