Question

4 Men's Wearhouse purchased black leather belts for $15.99 each and priced them to sell for $29.99 each. What was the markup on the belts? 5 Answer the following: (a) The Limited is planning a new line of leather Jean jackets for fall. It plans to retall the jackets for $100. It is having the Jackets produced in the Dominican Republic. Although The Limited does not own the factory, its product development and design costs are $400,000. The total cost of the jacket, including transportation to the stores, is $45. For this line to be successful, The Limited needs to make $900,000 profit. What is its break-even point in units and dollars? (b) The buyer has just found out that The GAP, one of The Limited's major competitors, Is bringing out a similar Jacket that will retail for $90. If The Limited wishes to match The GAP's price, how many units will it have to sell?

Answer 1

Q - 4

Mark up in $ terms = S.P - C.P = 29.99 - 15.99 = $ 14

Mark up in %age terms = Mark up / C.P = 14/ 15.99 = 87.55%

Q - 5

Let Q be the break even point, then

(S - C) x Q = FC

Or, (100 - 45) x Q = 400,000

Hence, the break even units = Q = 400,000 / 55 = 7,273

and break even dollars = S x Q = $ 727,273

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Part (b)

Let N be the number of units to sell. In that case,

(S - C) x N - FC = profit

Or, (90 - 45) x N - 400,000 = 900,000

Hence, N = 1,300,000 / 45 = 28,889 units