# Distinguish between Initial Markup, Cumulative Markup and Maintained Markup

**Short Answers: 2 pts**

1. ** Distinguish** between Initial Markup, Cumulative Markup and Maintained Markup (provide detailed definition and applications as discussed in the text+lecture video). Also provide formula for each.

2. List some of the common practices used in determining (forecasting) the initial markup as discussed in the lecture video.

3. The opening inventory on August 1 for the woman’s department was $2,000,000 at cost and $4,250,000 at retail. During the month the department received goods costing $900,000 with a 51% markup. Find the cumulative markup percentage.

**Quantitative Problems: 8 pts**

· **INITIAL MARKUP PROBLEMS:** Page141-143: Q2, 3,7,9, 10

2. A department shows a gross margin of 41% (37.9% expenses + 3.1% profit) and lists retail reductions (i.e., markdowns, shortages, and employee discounts) of 43%. What is the initial markup percentage?

3. A chain of specialty shops plans sales of $1,500,000 and retail reductions of $260,000. It needs a gross margin of $805,000 (i.e., expenses $550,000, profit $255,000). What should be the initial markup percentage?

7. A gross margin of 49.4% is targeted by a gift department. Retail reductions are 16% and cash discounts are 4%, with altercation costs of 1%. Find the initial markup percentage.

9. Determine the initial markup percentage from the following data:

Gross Margin = 46.8%

Markdowns = 35.0%

Employee discounts = 1.5%

Cash discounts to be earned = 15.0%

Alteration costs = 0.5%

10. The petite sportswear buyer plans seasonal net sales of $2,000,000, with a gross margin of 48%, markdowns (including employee discounts) estimated at 32.9%, planned shortages at 2.1%, cash discounts to be earned planned at 6%, and altercation costs at 1%. Calculate the planned initial markup percentage.

*Initial Markup (ADDITIONAL): *

1. Determine the initial markup percent for a sporting goods store that has the following planned figures for a three-month period:

· Net sales $425,000

· Profit 4.1%

· Expenses 30.0%

· Employee discounts $ 4,000

· Cash discounts $ 7,000

· Alteration costs 3.5%

· Shortages $ 3,825

· Markdowns 6.4%

2. Determine the initial markup percent for a sporting goods store that has the following planned figures for a three-month period:

· Gross sales $565,000

· Markdowns 5.2%

· Alteration costs $ 4,600

· Employee discounts 0.9%

· Cash discounts 2.1%

· Shortages $ 1,800

· Customer returns $ 5,000

· Expenses $173,600

· Profit 4.4%

· **CUMULATIVE MARKUP PROBLEMS:** Pages 144-146: Q11, 12, 13, 14, 15

11. A sleepwear buyer has an opening stock figure of $180,000 at retail, which carries a 62% markup. On March 31, new purchases since the start of the period were $990,000 at retail, carrying a 64% markup. Find the cumulative markup percentage on merchandise handled in this department to date.

12. The slipper department showed an opening inventory of $80,000 at retail, with a markup of 48%. The purchases for that month amounted to $30,000 at cost, which were marked in at 52%. The initial markup planned for this department was 50.5%.

(a) Determine the season-to-date cumulative markup percentage for the department.

(b) Was the department on target with its markup? If not, what factors caused a deviation?

13. A belt department had an opening inventory of $95,000 at retail, with a 55.8% markup. Purchases during November were $64,000 at cost and $142,000 at retail. Determine:

(a) The cumulative markup percentage.

Cost = Retail x (100% – MU%)

95,000 x (100 – 55.8%) = 41,990

($142,000 – 64,000) / 142,000 x 100 = 78,000 / 142,000 x 100 = 54.9%

(b) The markup percentage on the new purchases.

Total retail value = 95,000 +142,000 = 237,000

41,990 + 64,000 = 10,5990

(23,700 – 105,990) / 23,700 x 100 = 131,010 / 237,000 x 100

= 55.3%

14. During the Fall season, a retailer determined that in order to meet the nest season’s planned sales, the total amount of merchandise required next season was $360,000 at retail, with an initial markup goal of 52%. At the beginning of the next season, the merchandise on hand (opening inventory) came to $80,000 at retail, with a cumulative markup of 49% on these goods. For the coming season, what initial markup percentage does the buyer need to achieve on any new purchases?

Cost of opening inventory

**A** Cost = Retail x (100% – MU%)

Cost = 80,000 x (100% – 49%) = 40,800

Cost of Merchandise handled

**B** Cost = 360,000 x (100% – 52%) = 172,800

Cost of purchases

**C **Cost = Cost of total Merchandise goods – Cost of inventory

Cost = 172,800 – 40,800 = 132,000

Markup of purchases done

**D **Markup = Cost / Retail x 100

360,000 – 80,000 = 280,000

Cost = 132,000 / 280,000 x 100 = 47.14%

15. In preparation for a foreign buying trip, a buyer determines that a 55.4% markup is required on purchases that will amount to $560,000 at retail. While on this trip, the following purchases are made:

*Cost* *Retail*

Resource A $20,000 $45,000

Resource B $50,000 $125,000

Resource C $70,000 $170,000

What markup percentage is needed on the balance of the purchases?

· **MAINTAINED MARKUP PROBLEMS:** Pages 147-149: Q17,18,21,22

17. A sporting goods store has an initial markup of 44.5%. The expenses are 31%, markdowns are 12%, cost of assembling bicycles, and so on (i.e., workroom costs), are 6%, and shortages are 1%. What was the maintained markup percentage?

18. The Closet Shop had the following operational results:

Net sale = $125,000

Billed cost of new purchases = $64,000

Inward freight = $1,000

Alteration costs = $2,000

Cash discounts = $7,000

(a) The maintained markup in dollars and percentages.

(b) The gross margin in dollars and percentages.

21. The T-shirt department buyer determined that he department’s initial markup should be 51.5%. The buyer also wanted to attain a maintained markup of 45%. Under this plan, what retail (in percentage) would be allowed?

22. A boutique had planned a gross margin of 49%, with total retail reductions of 18%. At the end of the period, the maintained markup attained was actually 48.8%.

(a) Find the initial markup percentage needed to achieve the planned gross margin of 49%, with total retail reductions of 18%.

(b) Find the actual amount of markdowns (in percentages) taken.

Prove your calculations and explain your findings. What may have caused the maintained markup percentage to vary from the planned gross margin target?

*Maintained Markup (ADDITIONAL):*

1. Determine (a) the maintained markup percent and (b) the gross margin percent for a department that has the following figures:

· Net sales $475,000

· Net purchases 210,000

· Opening inventory 115,000

· Freight inward 3,200

· Closing inventory 95,000

· Cash discounts 4,850

· Alteration costs 2,150

2. Determine (a) the maintained markup percent and (b) the gross margin percent for a department that has the following figures

· Net sales $350,000 Net purchases 135,600 Opening inventory 120,000 Closing inventory 82,000 Freight inward 6,400 Cash discounts 8,950 Alteration costs 4,950