Question

A buyer plans to purchase 120 handbags for a special promotion. The handbags will retail for $39.00 each. She has already placed an order for 82 handbags at $20.00 each. What is the most she can pay for each remaining handbag if she is to achieve the department’s markup goal of 68.0%?

The buyer already placed the order for 82 handbags with a cost of $20.00 and a retail price of $39.00. This was the buyer's first issue. Without considering the MU on this first handbag, how could the buyer assume he/she/they could achieve the overall goal of 68.0%?  

1. State the existing cost per handbag for the second style the buyer would have needed to negotiate from the vendor.

Answer 1

Total bags Required = 120 units

Bags already bought = 82 units

Bags to be bought = 120 - 82 = 38 units

Retail Price of 1 bag = $ 39

Required margin = 68%

Target cost per bag =

= $ 23,2143

(It is calculated as - suppose cost of bag is $100 and you want 68% markup. The resultant cost will be $168. So, in this case retail price of bag is $39 which is equivalent to 168 and I want cost which will be equivalaent to 100. So I dividend 39 by 168 and multiplied with 100)

Total Target Cost of 120 Bags = 23.2143 X 120

= $ 2785.716

Cost already incurred in Procuring 82 bags = 20 X 82

= $ 1640

Maximum budget to procure remaining 38 units = 2785.716 - 1640

= $ 1145.716

Effective cost to procure remaining 38 Bags = 1145.716 / 38 bags

= $ 30.15.

Thanks.

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