B 13 MARKUP KNOWLEDGE The is the amount added to the cost of goods sold COGS to

# B 13 markup knowledge the is the amount added to the

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B-13 MARKUP KNOWLEDGE The ___________ is the amount added to the cost of goods sold (COGS) to arrive at the selling price. a. markup b. selling price c. return on investment d. stockturn rate e. markdown Answer: a Page(s): 372 LO: AACSB: Analytic QD: Easy Rationale: Text term definition—markup. See Figure B-2 in the textbook. B-14 MARKUP ON SELLING PRICE APPLICATION If Jane Westerlund, owner of a retail frame store, raises the average price of a framed picture to \$100 and the cost of goods sold is \$36, what is the percentage markup on selling price? a. 36 percent b. 56 percent c. 64 percent d. 100 percent e. 178 percent Answer: c Page(s): 372-374 LO: AACSB: Analytic QD: Hard Rationale: Markup = \$100 − \$36 = \$64. Markup on selling price (%) = [(Markup ÷ selling price) × 100] or [(\$64 ÷ \$100) × 100], which equals 64 percent. See Figure B-2 in the textbook. B-15 MARKUP ON COST APPLICATION If Jane Westerlund, owner of a retail frame store, raises the average price of a framed picture to \$80 and the cost of goods sold is \$36, what is the percentage markup on cost? a. 36 percent - 4 - b. 55 percent c. 64 percent d. 100 percent e. 182 percent Answer: b Page(s): 372-374 LO: AACSB: Analytic QD: Hard Rationale: Markup on cost (%) = [(Markup ÷ selling price) × 100]. In this case, markup = \$80 − \$36 or \$44. [\$44 ÷ \$100] × 100 = 55%. See Figure B-2 in the textbook. B-16 MARKUP ON COST APPLICATION Jane Westerlund, owner of a retail frame store, raises the average price of a framed picture to \$100 and the cost of goods sold is \$36. If the markup on cost is 150 percent, what is the markup on selling price? a. 36 percent b. 60 percent c. 100 percent d. 150 percent e. 300 percent Answer: b Page(s): 372-374 LO: AACSB: Analytic QD: Hard Rationale: The average price of framed picture to \$100 and the cost of goods sold is \$36. Markup on selling price (percent) equals markup divided by selling price. Markup on cost (percent) equals markup divided by cost of goods sold. Markup on selling price equals markup on cost (%) divided by (100% + markup on cost (%)) × 100. In this case, markup on selling price = [150% ÷ 250%] × 100 or 60%. See Figure B-2 in the textbook. B-17 MARKDOWN KNOWLEDGE A __________ is a reduction in a retail price that is necessary if the item will not sell at the full selling price to which it has been marked up. a. stockturn rate b. markdown c. ROI d. markup e. net margin Answer: b Page(s): 372, 373-374 LO: AACSB: Analytic QD: Easy Rationale: Text term definition—markdown. See Figure B-2 in the textbook. B-18 MARKDOWN APPLICATION When Paulette saw the dress in the store window, she knew two things. She had to own the dress, and she could not afford it at its current price. As she visited the dress in the store, she thought of the dress as her own and believed no one else would buy it. It seems she was right because no one else did buy it and the store had to reduce its price by 30 percent in order to dispose of it.  #### You've reached the end of your free preview.

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• Fall '11
• Revenue, AACSB, markup, Figure B-2
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