Question

EXERCISES IN FINANCIAL ANALYSIS OF MARKETING DECISIONS 1. An item sells with a markup of 37 per cent on selling price. What is the markup as a percentage on cost? 2. Nora Chambers is preparing a new product analysis for a product she has code- named L240. She has decided L240 should sell at $94.95 retail, based on her market research. Retailers customarily expect a 40 per cent markup and wholesalers, a 20 per cent markup (both expressed as a percentage of their selling price). L240's variable costs are $31.50 per unit and estimates total incremental fixed costs are $80,000. At an anticipated sales volume of 5,000 units, will Nora's L240 make a profit? 3. A buyer was offered an item for his store with the following terms: "$125. less 35%, less 10%, less 3%?" How much must he pay if he takes advantage of all the available discounts? 4. If a retailer reduces the selling price of items 30 per cent and sells the items, what is the markdown percentage on net sales?

Answer 1

1]

let us say the selling price is $100

markup in $ = selling price * markup %

markup in $ = $100 * 37% = $37

cost price = selling price - markup in $

cost price = $100 - $37 = $63

markup on cost in % =  markup in $ / cost price

markup on cost in % =  $37 / $63

markup on cost in % = 58.73%