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4.03 Solve Related Mathematical Problems

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Opening Cash Fund The opening cash drawer contains the coins and currency for the days business The till is over if there is more money than planned The till is short if there is less money than planned

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Completing a Sales Transaction The extension is the result of multiplying the number of units by the cost per unit Add item amounts Calculate sales tax and total

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Completing a Sales Transaction 2 running shorts at $32.50 each 3 pair of socks at $5 each Tax is 7.5% 2 x $32.50 = $65.00 3 x $ 5.00 = $15.00 $65.00 + $15.00 = $80.00 $80.00 x.075 = $6.00 $80.00 + $6.00 = $86.00

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Types of Retail Sales Cash sales include cash or checks Debit cards are bankcards or ATM cards – funds are withdrawn from the customers checking account

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Cost of Merchandise Sold The amount a retailer actually pays for merchandise

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Factors Affecting the Cost of Merchandise Sold Cost may be negotiable due to discounts and terms Discounts – a reduction in the selling price offered by manufacturers and distributors to their customers to encourage prompt payment and stimulate purchasing Allowances – free merchandise given by a manufacturer for large orders as a means of goodwill and to encourage future purchases

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Explain the Difference Between Pricing and Markup Profit is the amount left from revenue (sales) after the costs of merchandise and expenses have been paid. Expenses include such things as rent, utilities, and salaries. Markup is the difference between retail price and cost. In order for a business to be profitable, its markup must be high enough to cover expenses and maintain desired profit.

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Explain and Calculate Gross and Net Profit Gross profit is a business income minus the cost of goods sold. Income is the total of all sales for the time period minus any sales returns and allowances Cost of goods (merchandise) sold is the actual amount paid to the vendors for the merchandise Net profit is what is left after all expenses have been paid by the business

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Calculate Retail Price The most basic pricing formula is the one for calculating retail price when given cost and dollar markup RETAIL PRICE (RP)= COST(C) + MARKUP (MU) $500 = $300 + $200 RETAIL PRICE (RP) = COST(C) / 1-MARKUP % (% markup) $500 = $300 / 1- 40%

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Calculate Cost and Markup Formulas for cost and markup can easily be derived from the formula, RP=C+ MU. Cost= RP – MU Markup= RP - C $300 = $500- $200 $200 = $500 - 300

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Calculate Markup Percentage Markup percentage based on retail. When markup percentage is based on retail, retail price always equals 100 %. To determine markup percentage, divide dollar markup by retail price. MU% BASED ON RETAIL= DOLLAR MU / RP 40% = $200 / $500

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Calculate Markup Percentage continued... To determine markup percentage based on cost, divide dollar markup by cost. MU% BASED ON COST = DOLLAR MU / C 66.67% = $200 / $300

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Reasons for Markdowns Buying errors. Wrong styles, color, sizes, materials, and/or quantities have been purchased.

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Calculate Markdowns Markdowns are used as a tool to stimulate sales, dispose of slow moving/discontinued merchandise, meet competitors prices and increase customer traffic. MARKDOWN (MD) = RETAIL PRICE X MD% $25 = $100 X 25%

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Find Markdown Percentage Markdowns are expressed as a percentage of net sales and cannot be calculated until merchandise is sold. MD%= DOLLAR MD / NET SALES 1.8%= $10,000 / $550,000

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McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved Chapter 8 Markups and Markdowns: Perishables and Breakeven Analysis.

McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved Chapter 8 Markups and Markdowns: Perishables and Breakeven Analysis.

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