Investment Math exam 2 PDF

Preview

Summary

Download Investment Math exam 2 PDF

Description

Chapter TTwelve welve Markups and Markdo Markdowns; wns; Perishables and Breakev Breakeven en Analysis Terminology 1- Selling Price - The price retailers charge customers. 2- Cost - The price retailers pay to a manufacturer or supplier to bring goods into the store. 3- Markup, margin, or gross profi profitt – The difference between the cost of bringing the goods into the store and the selling price of the goods. 4- Operating expenses or overh overhead ead – The regular expenses of doing business, such as wages, rent, utilities, insurance, and advertising. 5- Net profit or net income - The profit remaining after subtracting the cost of bringing the goods into the st store ore and the operating expenses from the sale of the goods (including any returns or adjustments). 6- Gross profit is the selling price of the merchandise minus the cost of bringing merchandise into the store. 7- Operating expenses are an uncommon expense of doing business. 8- Gross profit plus operating expenses equals net income. 9- Selling price = cost − markup. 10- When markups are based on cost, the selling price is 100%. 11-The amount of markup is represented as the portion only when markups are based on cost. 12-The selling price can be calculated if the cost and the percent markup on cost are given 13- Cost can be calculated by multiplying the selling price by one hundred percent plus the percent markup on cost. 14- Cost is equal to the selling price divided by (1 + percent markup on cost) when markup is based on cost. 15- When markup is based on selling price, the cost is 100%. 16- When markup is based on selling price, the cost is the base. 17-Percent markup on the selling price is equal to the amount of markup divided by the selling price. 13- If the selling price and percent markup on selling price are given, the cost can be calculated. 19- Selling price times 1 minus markup percent on selling price will equal the cost if markup is based on selling price. 20- Dollar markup divided by the selling price equals percent markup on cost. 21-Percent markup on selling price can be converted to percent markup on cost by formula. 22- Dollar markdowns represent price increases to the original selling price. Selling price = cost + markup. selling price= (1 + markup percent on cost) × cost equals Cost = SP/(1 + % Markup on Cost)

1

Calculating Dollar Markup and Percent Mark Markup up on Cost Example: Gap buys fleece jackets for $18. They plan to sell them for $23. What is Gap’s markup? What is the percent markup on cost? Dollar markup = Selling price − Cost $ 5 = $23 − $18 $𝟓 𝑫𝒐𝒍𝒍𝒂𝒓 𝒎𝒂𝒓𝒌𝒖𝒑 = = 27.78% or 0.2778 𝒄𝒐𝒔𝒕 $𝟏𝟖 $𝟓 𝑫𝒐𝒍𝒍𝒂𝒓 𝒎𝒂𝒓𝒌𝒖𝒑 Cost (B) = = 𝑷𝒆𝒓𝒔𝒆𝒏𝒕 𝒎𝒂𝒓𝒌𝒖𝒑 𝒐𝒏 𝒄𝒐𝒔𝒕 = = $18 𝟎.𝟐𝟕𝟕𝟖

Percent markup on cost =

Calculating Selling Price When Y You ou Know Cost and Percent Mark Markup up on Cost Example: Mel’s Furniture bought a lamp that cost $100. To make Mel’s desired profit, he needs a 65% markup on cost. What is Mel’s dollar markup? What is his selling price? S = C + M S = $100 + .65($100) S = $100 + $65 Dollar Markup S = $165 selling Price Calculating Cost When Y You ou Know Selling Price and Pe Percent rcent Markup on Cost Example: Jill Sport, owner of Sports, Inc., sells tennis rackets for $50. To make her desired profit, Jill needs a 40% markup on cost. What do the tennis rackets cost Jill? What is the dollar markup? Calculate the cost: S (Selling Price) = C (Cost) + M (Markup) $50 = C + .40(C) $50 = 1.40C 1.40 1.40 $35.71 = C Calculate the dollar mark markup up up: M=S–C M = $50 - $ 35.71 = $ 14.29 Formula for Conv Conver er erting ting Percent Markup on Cost tto o Percent Markup on Selling Price: 𝑷𝒆𝒓𝒄𝒆𝒏𝒕 𝒎𝒂𝒓𝒌𝒖𝒑 𝒐𝒏 𝒄𝒐𝒔𝒕 𝟏 + 𝑷𝒆𝒓𝒄𝒆𝒏𝒕 𝒎𝒂𝒓𝒌𝒖𝒑 𝒐𝒏 𝒄𝒐𝒔𝒕 Formula for Conv Conver er erting ting Percent Markup on Selling Price tto o Percent Mark Markup up on Cost: 𝑷𝒆𝒓𝒄𝒆𝒏𝒕 𝒎𝒂𝒓𝒌𝒖𝒑 𝒐𝒏 𝒔𝒆𝒍𝒍𝒊𝒏𝒈 𝒑𝒓𝒊𝒄𝒆 𝟏 − 𝑷𝒆𝒓𝒄𝒆𝒏𝒕 𝒎𝒂𝒓𝒌𝒖𝒑 𝒐𝒏 𝒔𝒆𝒍𝒍𝒊𝒏𝒈 𝒑𝒓𝒊𝒄𝒆

2

MARKDOWNS 𝑫𝒐𝒍𝒍𝒂𝒓 𝒎𝒂𝒓𝒌𝒅𝒐𝒘𝒏 𝑺𝒆𝒍𝒍𝒊𝒏𝒈 𝒑𝒓𝒊𝒄𝒆 (𝒐𝒓𝒊𝒈𝒊𝒏𝒂𝒍)

Markdown percent =

Dollar markup = Original selling price − New selling price Example: Kmart marked down an $18.00 video to $10.80. Calculate the dollar markdown and the markdown percent. $18.00 − $10.80 = $7.20 markdown $7.20 𝑫𝒐𝒍𝒍𝒂𝒓 𝒎𝒂𝒓𝒌𝒅𝒐𝒘𝒏 = = 40% 𝑺𝒆𝒍𝒍𝒊𝒏𝒈 𝒑𝒓𝒊𝒄𝒆 (𝒐𝒓𝒊𝒈𝒊𝒏𝒂𝒍) $18.00 Pricing Perishable Items Example: Audrey’ Audrey’ss Bake Shop bak baked ed 20 dozen bagels. Audr Audrey ey expects 10% of the bagels to become stale and not sa salable. lable. Th The e bage bagels ls cost Audrey $1.20 per dozen. Audre Audreyy wants a6 60% 0% markup on cost. What should Audrey charge for each doz dozen en of bage bagels ls so she will make her profit? Solution : TC (Total Cost) = 20 dozen x $1.20 = $24.00 TS (Total Sales) = TC + TM TS = $24 + .60($24) TS = $24 + $14.40 TS = $38.40 20 dozen × .10 = 2 dozen $38.40 = $2.13 18

Calculating a Bre Breake ake akeven ven P Point oint (BE) Contribution margi margin n = Selling price − V Variable ariable cost CM) = (S) - (VC) Example: Assume Jones Company produces pens that have a selling price (S) of $2.00 and a variable cost (VC) of $.80. We calculate the contribution margin (CM) as follows. Solution: CM = $2.00 (S) − $.80 (VC) 3

𝒇𝒊𝒙𝒆𝒅 𝒄𝒐𝒔𝒕𝒔 (𝑭𝒄)

Breakeven point (BE) =

𝑪𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 𝒎𝒂𝒓𝒈𝒊𝒏 (𝑪𝑴)

Example Jones Company produces pens. The company has a fixed cost (FC) of $60,000. Each pen sells for $2.00 with a variable cost (VC) of $.80 per pen Solution: . Breakeven point (BE) =

$𝟔𝟎.𝟎𝟎𝟎 $𝟐.𝟎𝟎−$𝟎.𝟖𝟎(𝑽𝑪)

At 50,000 units (pens), Jones Company is just covering its costs. Each unit after 50,000 brings in a profit of $1.20 (CM). Exercises: An Apple iPod sells for $299, which is marked up 40% of the selling price. The -1 cost of the iPod is: A) $186.88 B) $179.40 C) $119.6 D) $213.57 2- Gap sells jeans that cost $21.00 for a selling price of $29.95. The percent markup based on cost is: A) 42.62% B) 70.12% C) 29.88% D) 142.62% 3-Johnny Mac's Sporting Goods bought a baseball glove from Rawlings Sporting Goods for $66.00. They want to mark up the glove 70% on selling price. What should Johnny's sell the glove for? A) $112.20 B) $85.80 C) $94.29 D) $220.00 4-Macy's Department Stores markup men's cologne 63% on cost for an 8-ounce bottle. A bottle of cologne costs Macy's $23.00. What is the selling price for the 8-ounce bottle? A) $31.51 B) $37.49 C) $36.51 D) $62.16 5-An Apple iPad sells for $699.00 on eBay. The markup is 30% on cost. What is the seller's cost? A) $537.69 B) $489.30 C) $908.70 D) $489.50 6- A wooden duck with a regular selling price of $125.99 is marked down to $79.99. The percent markdown is: A) 57.51% B) 36.51% C) 63.49% D) 42.49%

4...