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

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