Answer Happy

Note that our operating expenses are 40.7% of cost. (10 points) Use a markup rate to compute selling prices Use the 63.5% markup on cost of goods to determine the actual selling price needed for each item that BOG, sells. Divide the total value of each item by the number of expected sales to get the final cost per item. Use the final cost totals (after cash discounts) in the two tables on the following page. Then find the selling price for each item after the markup of 63.5% is applied. Example: The purchase of sleeping bags cost us $9,420.46 after the cash discount (see the table below). We expect to sell 230 sleeping bags, so the cost for each comes to $9,420 46/230 $40.96 per bag. To apply the 63.5% markup on cost, we multiply the final cost per item by 1.635 (163.5%, which includes the base cost as 100% plus the markup) to get the selling price of $40.96 1.635-$66.97 per sleeping bag. Note: The list price given by ACME Outfitters was $474 for 6 sleeping bags, or $79 each. Due to the trade and cash discounts, we are actually able to offer the sleeping bag to the customer at a bargain price ($12.03 under list) Math with Business Applications - Project #3 Better Outdoor Gear: The Math of Selling As in this example, it is company practice to divide total net cost by the expected number of sales to find the cost per item for each product. We expect to have some extra unsellable merchandise because of the supplier's case requirements. We had to order sleeping bags in cases of six, so we actually received 234 sleeping bags instead of 230, but we divide by 230 because this is the number we had projected we can sell. This is not a big difference in this case, but we will always follow this system to be consistent. Complete the table by computing the cost per item and selling price per item for each item that we purchased. Follow the example given for the sleeping bags. Items from ACME Outfitter S Sales Qty 230 40 80 550 Cash Discount $192.25 $99.42 Description Total Cost Sleeping bag Tent Backpack $6,198.40 $123.97 Flashlight $2,392.00 $47.84 $9,612.71 $4,971.20 Cost per Selling price per item $66.97 item Final Cost $9,420.46 $40.96 $4871.78 $6,074.43 $2,344.16
Items from Camper's Warehou se Sales Qty 150 340 Description Total Cost Binoculars Cash Discount First Aid Kits $3,477.60 item Final Cost $4,815.72 $3,408.05 $98.28 $4,914.00 $69.55 Cost per Selling price per item
B. (12 points) Compute markdowns for a sale. Late in the season, we find that we have a lot of unsold merchandise. In order to move more items, the owner says we should have a sale to clear inventory before the next season begins. 1. If tents are marked down 40%, what is the sale price? 2. If binoculars are marked down 30%, what is the sale price? 3. On these two sale items (tents and binoculars), determine if we have a reduced profit margin, an operating loss, or an absolute loss. Find the dollar amount for each profit or loss. Think of this as a report to your manager on whether these markdown rates are good choices for the clearance sale or not. Note that our operating expenses are 40.7% of cost.
C. (12 points) Final Clearance. The current backpack model is no longer being manufactured. We want to run a close-out clearance sale on the backpacks left in stock to make room for the new model. The arbitrary markdown rates used in Part B may not have been realistic choices, so in this section you are asked to determine some markdown rates using mathematics and your knowledge of our cost and pricing system. 1. What is the break-even point on a backpack? Note that our operating expenses are 40.7% of cost. 2. What percent-off sale can we run on the backpacks and still make this break-even point? This is the biggest sale we can offer without losing money on the backpacks. Set reduced price = break-even point. Find the rate. 3. What percent-off sale can we run on the backpacks without incurring an absolute loss? That is, find the percentage markdown that would just cover the cost we paid for the backpacks. Set reduced price = cost. Find the markdown rate.
6 D. (16 points) Compute inventory values. Another way to judge the value of goods in stock is to count inventory. Suppose that we are going to extend the clearance sale to flashlights as well, but we have a lot of these left in stock. Here is a record of recent purchases in the past year: Purchase Date January 1 April 1 July 1 October 1 Quantity Cost per Item Total Cost 500 $4.25 $4.16 $4.23 $4.20 700 400 600 1. Calculate the total cost for each of the flashlight purchase dates above. 2. How many total flashlights were purchased in this calendar year? 3. What is the average cost per flashlight this year? (We are using the weighted average cost method here) 4. Records show that we have sold a total of 1849 flashlights from January 1 to November 1, how many flashlights are left in inventory as of November 1? 5. What is the current inventory value on these remaining flashlights (use the weighted average cost)?