Essay about Retail Marketing Financial

873 Words Dec 13th, 2013 4 Pages
QUESTION # 1: A retailer has yearly sales of $650,000. Inventory on January 1 is $260,000 (at cost). During the year, $500,000 of merchandise (at cost) is purchased. The ending inventory is $275,000 (at cost). Operating costs are $90,000. a. Calculate the cost of goods sold b. Calculate the net profit

PART A: Cost of goods sold = = = = PART B: Net Profit = Gross Profit – Operating Expenses Cost of merchandise available for sale – cost value of ending inventory ($260,000 + $500,000) - $275,000 $760,000 - $275,000 $485,000

First you have to calculate the Gross Profit: Gross Profit = = = Sales – Cost of Goods Sold $650,000 - $485,000 (calculated in Part A) $165,000

Now, you can calculate the net profit: Net Profit = = $165,000 -
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$10,000 is the adjusted ending retail book value (Part E)  this is at retail. To calculate cost of Goods sold, you need to determine the value of these goods at cost. So you must use the cost compliment. $10,000 X 0.56 (cost compliment) = $5,600

Total Merchandise available for sale (at cost) = $112,000 (Part A) - adjusted ending inventory at cost = - $5,600 (above) $106,000 = Cost of Good Sold

Sales – Cost of Goods Sold = Gross Profit $150,000 - $106,000 = $43,600

QUESTION # 4: A car dealer purchased multiple –disc CD players for $1175 each and desires a 40% markup (at retail). What retail price should be charged?

Markups can be computed on the basis of retail selling price or cost but are typically calculating using the retail price. Why? (1) Retail expenses, markdowns and profit are always stated as a percentage of sales. Thus, markups expressed as a percentage of sales are more meaningful. (2) Manufacturers quote selling prices and discounts to retails as percentage reductions from retail list prices. (3) Retail price data are more readily available than cost data. (4) Profitability seems smaller if expressed on the basis of price. The question is not the retailer wants to increase their cost by 40%. The question states that the retailer wants to make (in profit) 40%.

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