Question

Sports Extreme advertised a Freestyle XL Stand Up Paddleboard for a regular price of $680. Sports Extreme bought the board from its supplier for $505 less a trade discount of 30%. The Sports Extreme's overhead expenses are 20% of cost. a. What operating profit or loss will Sports Extreme realize if the paddleboard is sold at the regular price? (Round your answer to 2 decimal places.) (Click to sele s b. What operating profit or loss will Sports Extreme realize if the paddleboard is sold during a 25% off weekend sale? (Round your answer to 2 decimal places.) (Click to sele S c. What rate of markdown can Sports Extreme advertise if it is willing to just break even on the sale of the paddle board during an end of season sale? (Round your answer to 2 decimal places.) Rate of markdown %

Answer 1

Cost less discount = 505 x (1 - 30%) = 353.50

Cost including overhead = 353.50 x (1 + 20%) = 424.20

a) Operating Profit = 680 - 424.20 = 255.80

b) Profit = 680 x (1 - 25%) - 424.20 = 85.80

c) Rate of markdown = 424.20 / 680 - 1 = -37.62%