Marketing Applications Saturday, July31,2021 210 AM Discounts Formas 624—Docot Anse ES Lxd ormutne2p-Docunt Amounts DS = J— Exercise "Xmanufactarcr Ut sls eas direcy to Re Faller uncs MAFREE Fscarch Wo ind out Renceds to ollera 25% wade discount. In doing so, the retailers wil dhen beable to price the product atthe MSRP of $59.99. What price should retailers pay forthe jeans? Calculate how much a retailer should pay for the jeans after the regular price has been discounted to accommodate the trade discount. This is called the net price for the product, or N. N= $59.99 X (1 ~0.25) = $59.99 X 0.75 = $44.99 ‘The manufacturer should sell the jeans to the retailers for $44.99. Multiple DiscountsFormula 6.3 ~ Multiple Discounts: N=Lx(1-d,)x(1-d,)X... (1-d, Exercise ‘Mountain Equipment Co-op has purchased a college backpack for $29 after discounts of 30%, 8%, ‘and 13%. What is the MSRP for the backpack? Formula 6.4 ~ Single Equivalent Discount: equiv = 1-(1-d,) X(1-d,)X «.. X(1 ares ‘Mountain Equipment Co-op has purchased a college backpack for $29 after discounts of 30%, 8%, ‘and 13%. What is the MSRP for the backpack? 29,00 = L x (1- 0.30) x (1-0.08) x (1- 0.13) $29.00 = L x0.70 x 0.92 «0.87 L What single discount is equivalent to the three discounts? N=$29; d, = 0.30; d2=0.08; ds =0.13 d=1- (10.30) x (1-0, 8) x (1 -0.13) = 1 (0.70)(0.92)(0.87)d=43.972%6Markup: Setting the Regular Price Saturday, July31,2021 230 AM Formala 65: The Seng rice ofa Produc *S = C+ E+‘MS is Markup Amount: Markup is taking the cost of a product and converting it into a selling price. The markup amount represents the dollar amount difference between the cost and the selling price. Formula 6.6~ Markup Amount P is Profit: The profit earned when the product sells is Expenses: The expenses associated with the product Note that since the markup amount (Ms) represents the expenses (E) and profit (P) combined, you can substitute the variable for markup amount into Formula 6.5 to create Formula 6.7, which calculates the regular selling price. Cis Cost: The amount of money needed to acquire or MS is Markup Amount: From Formula 6.6, Se a ae this isthe single number that represents the total acquired, the costs the same amount asthe net pri of te expenacs and poi ~ MoC% is Markup on Cost Percentage: This {s the percentage by which the cost of the product needs to be increased to arrive at the selling price MS is Markup Amount: The total dollars of the expenses and the profits; this total is the forthe pu Aference between the cost andthe selling price —— Formula 6.8 ~ Markup On Cost Percentage: MOC% x 10) nage eC Cis Cost: The amount of money needed to acq ‘manufacture the product. Ifthe product is acquired, the cost isthe same amount as the net price paid. TD -MoS% is Markup on Selling Price Percentage: This i the percentage ofthe selling price that remains available as list profits after the cost of the prod X 100 is Percent Conversion: The markup on cost is always a percentage. MS is Markup Amount: The total dollars of. the expenses and the profits; this total is the difference between the cost and the selling price. is recovered, mst rng MOS% =X 100 Formula 6.9— Markup On S X 100 is Percent Conversion: The markup on Sees VYExercise If a pair of sunglasses sells at a regular unit selling price of $249.99 and the markup is always 55% of the regular unit selling price, what is the cost of the sunglasses? Working with Markup: Step 1:5=$289,99; Mos%4-55% Step 2: MoS% = ¥8 x 100 ois x 100 24999" $ M 055= Sya955 $137.49 = M$ +$13749 Exercise ‘The markup amount on an eMachines desktop computer is $131.64. if the machine regularly retails for $497.25 and expenses average 15% of the selling price, what profit will be earned? Working with Marky Step 1: M$=$131. =$497.25 step Step 2: $497.25 = $365.61 + $74.59 +P $497.25 = $440.20 +P 15($497.25) =$74.59; Exercise Manitoba Telecom Services (MTS) purchases an iPhone for $749.99 less discounts of 25% and 15%. MTS's expenses are known to average 30% of the regular unit selling price. a. What is the regular unit selling price if a profit of $35 per iPhone is required? b. What are the expenses? c. What is the markup on cost percentage? d. What is the break-even selling price? Solution a. Pricing Components: Step 1: L=$749.99; di=0.25; de=0.15; £0.305; P=$35.00, N= $749.99 x (10.25) x (1-0.15)N=$749,99>0.75 x0.85 478.12 =C Step 2:5=C+E4P }78.12 + 0.305 + $35.00 $= $513.12 + 0.305 0.705 = $513.12 $= $7303 b. £ =0.3(5) =0.3($733.03) = $219.91 Working with Marky step Step 2:5 =C+M$ $478.12+ M$ is Ms $254.91 Mo% == x 100 = gx 100 = [BSSISIG 4. Pricing Components: $478.12; E=$219.91 $0 thus: Sue = $478.12 + $219.91 + $0 = $698.03 Exercise If a pair of sunglasses sells at a regular unit selling price of $249.99 and the markup is always 55% of the regular unit selling price, what is the cost of the sunglasses? Working with Markup: Step 1:5=$249.99; Mos%-55% Step 2: MoS% = ™8 x 100 Ms $137.49Markdown: Setting the Sale Price Saturday, July31,2021 451 AM Soma percent. Conceptually, the sale pric Siis Selling Price: The regular selling price of the product before any discounts. The higher price is the list price. In merchandising questions, this dollar amount may or may not be a known variable. Ifthe selling price is unknown, you must calculate it using an appropriate formula or combination of formulas from either Section 6.1 oF Section 6.2. Sale Peice The le prc nth ice fh prod er racton by the marten ee LT Formula 610-The Sale Price OFA Product: Sonsate = § X (1 — dl dis Markdown Rate: A markdown rate is the same as asale discount rate. Therefore you use the same discount rate symbol from Section 6.1 to represent the percentage (ln decimal format) by which you reduce the selling price. As in Formula 6.1, note that you are interested in calculating the sale price and not the amount saved. Thus, you take the markdown rate away from 1 to ind out tl rate owing. Formulas 6.1 1a and 6.11b adapt these formulas to markdown situations. DS is Markdown Amount: You determine the markdown amount using either formula depending at infor Formula 6.11b~ Markdown Amount: Sis Selling Price: The regular selling price belore you apply any markdown percentages Somat is Sale Price: The price after you have deducted all markdown percentages tion is known. If you know the selling price and markdown percent, apply Formula 6.1 a. Ifyou know the selling price and sale price, apply Formula 6.11b. dis Markdown Rate: the percentage of the selling price to be deducted (in decimal format). In this case, because you are interested in figuring out how much the percentage is worth, you do not take it away from I asin Formula 6,10.Formula 612~ Markdown Percentage: CL x 100 Exercise During its special Bay Days, The Bay advertises a Timex watch for $39.99 with a regular price of $84.99, Calculate the markdown percent and markdown amount. Soamte = $39.99; S = $84.99 ‘Markdown dollars D$ = $84.99- $39.99 Markdown percent D: a 78.100 d= $45 + $84.99 x 100 d=52.9974%6 Exercise Step 1:Ssane = $39.99; d Step 2: Selling price Sousa =S x (1d) x (10.70) Markdown dollars DS =S Sonate DS =$133,30- $39.99 DS = $93.31Merchandising Saturday, July31,2021 5:01 AM Exercise A skateboard shop stocks a Tony Hawk Birdhouse Premium Complete Skateboard. The MSRP for this board is $82. Ifthe shop is goingto stock the board, it must order at least 25 units. The known information is as follo + The supplier offers a retail trade discount of 37% with a quantity discount of 12% for orders that exceed 15 units. + Typical expenses associated with selling this premium skateboard amount to 31% of the regular selling price. + The skateboard shop wants each of its products to have profitability of 13% of the regular selling price. + In the event that the skateboards do not sell by the end of the season, the skateboard shop always holds an end-of-season clearance sale where it marks down its products to the break-even selling price. Using this information about the skateboard, determine the following: a. Cost b. Regular unit selling price c Markup on cost percentage d. Markup on selling price percentage e.Sale price £. Markdown percentage What You Already Know ] How You Will Get There Step 1: The list price, | Step 2: ‘two discounts (note the | a, Cost and net price are synonymous. Ni pears in Formulas 6.1, 6. store qualifies for both 6.3. Since you know list price and two discounts, calculate cost through Forn since it meets the pears in Formulas 6.5, 6.7, 6.9, 6.10, 6.11, and 6.11b, Known criteria), expense icude expenses and profit. You will know the cost once you have solved profit inf c Formula 6.5. wella appears only in Formula 6.8. You will know the cost once the sale price are known: ‘you have solved part (a). MS isan unknown variable. spon selling price percent appears only in Formula 6.9. You will know the rn variable E=0.318 have solved part (a) and determined the expenses based on the selling price in part P=0.138 . break-even pri ‘Markdown percent appears in Formulas 6.10, 6.1 1a, and 6.12. You will k Te eninown variables | have sled part). Chose Formal 6.12 pe sep: C-8, MaC%, Mos%, | From habe rationalization, te oly unknown vaiablesare cost and markup dla Sa and rardowm, Is you al other formals Caleate cos tcp 2, To calculate markp dollars, we Forrla 6.6, 6.7, 6.8, and 69 pre Hom prs 2a and 2), yon can ply rtp dlaa. C=N= $82 (1 ~0.37) X (10.12) = $45.46 b. | S= 545.46 + 0.318 + 0.138 0.568 = $45.46 S=S81.18 instep 3, you nced markup dollars frst 45.46 + Ms Now solve: MoC% = 2522 x 100 = 78.5746% 4. MoS% = 2522 x 100 = 44% ©. Sut = Sue = $45.46 + 0,31(S81.18) = $70.63 £, $70.63 = $81.18 x (1d) oa7=1-4 on=d ‘The cost of the skateboard is $45.46. The regular selling price for the skateboard is $81.18. This is a markup on cost percent of 78.5746% and a markup on selling price percent of 44%. To clear out the skateboards, the sale price is $70.63, representing a markdown of 13%.