Question

A clothing store buys for $37 less 27% for buying over 50 pairs and less a further 19 3/4% for buying last season's style. The gloves are then marked up to cover overhead expenses of 45% of cost and a profit of 44 3/4% of cost.

(A.) What is the regular selling price of the gloves?

(B.) What is the maximum amount of markdown to break-even?

(C.) What is the rate of markdown if the gloves are sold at the break-even price?

*** Round each final answer to two decimal places as needed. Round all intermediate values to six places as needed.

Answer 1

Solution:

A) Calculation of regular selling price.

Selling price (S) = cost (C) + expenses (E) + profit (P)

S = [$ 37 x (100-27) % x (100 - 19.75)%] + (45% of cost) + (44.75% of cost)

S = $ 21.675525 +( 45% x 21.675525) + (44.75% x 21.675525)

S = $ 21.675525 + $ 9.753986 + $ 9.699797

S = $ 41.13

So, regular selling price is $41.13

B) Maximum amount of markdown to break-even:

At break - even price , profit is zero. So this price covers only the cost of buying and overhead cost.

So we calculate Break even price as = Cost + expenses

= $ 21.675525 + $ 9.753986

= $ 31.43

Maximum amount of mark-down needed to break-even is:

Mark-down = Regular selling price - Break even price

= $ 41.13 - $ 31.43

Mark-down = $ 9.7

C) Rate of markdown if gloves are sold at break even price ,

Rate of mark down = (Markdown / Regular Selling price) x 100

= (9.7 / 41.13) x 100

= 23.58%