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Homework answers / question archive / Problem #1 You are to construct an operating statement from the following data; then compute the gross-margin
Problem #1 You are to construct an operating statement from the following data; then compute the gross-margin. Purchases billed (at cost) $ 15,000 Net sales 30,000 Rent 1,500 Salaries 6,000 Purchase discounts 300 Returns 100 Opening inventory (at cost) 10,000 Advertising 600 Freight-in 500 Other expenses 2,000 Closing inventory (at cost) 7,500 1?An article has a retail value of $10 and a cost of $7. Find the markup in dollars What is the markup percent? What is the markup percent based on cost? 2?Competition in a line of sporting goods limits the retail selling price on a certain item to $25. If the store owner feels a markup of 35 percent is needed to cover expenses and return a reasonable profit, what is the most the owner can pay for this item? 3?Determine the market potential for a product that has 50 thousand prospective buyers who purchase an average of 3 units per year and price averages $25. What is the market potential in $? How many units must a company sell if it desires a 10% share of the market? 4?Suppose we looked at our retailer’s balance sheet for the period of the profit and loss statement and found that it showed total assets of $500,000. While the profit and loss statement showed a net profit of $40,000. What is the Return On Investment %?
Marketing Arithmetic
Problem #1
MONTHLY BUSINESS OPERATING STATEMENT
Financial Report for: The Month of April 2021
|
Income |
Amount ($) |
|
Net Sales |
30, 000 |
|
Returns |
100 |
|
Purchase Discounts |
300 |
|
Total Revenue |
30,400 |
|
Cost/Expenses |
Amount ($) |
|
Purchases |
15,000 |
|
Rent |
1,500 |
|
Salary |
6,000 |
|
Opening Inventory |
10,000 |
|
Advertising |
600 |
|
Freight-in |
500 |
|
Other expenses |
2,000 |
|
Closing inventory |
7,500 |
|
Total |
43,100 |
Gross Margin is (Total Revenue – Cost of Goods Sold)/Total Revenue * 100
Total Revenue= $30,400
Cost of goods sold= Beginning Inventory + Purchases during the period – Closing Inventory
Cost of goods sold= 10,000 + 15,000 – 7,500
= $ 17,500
Therefore Gross Margin = (30,400 – 17,500)/30,400 *100
Answer = 42.4%
Question 1
Therefore it is $10 -$7 = $ 3
Markup is $3
Therefore it is ($10 -$7)/10 * 100
Markup Percentage is 30%
Therefore it s ($10 -$7)/7 * 100
Markup Percentage is 42.8%
Question 2
Markup % = (Selling Price – Cost)/Cost * 100
Selling Price = $25
Cost =(x)
Markup %= 35%
Therefore, 35% = (25-x)/x *100
135x =2500
x= 2500/135
Answer = $18.5
Question 3
Buyers Per year = 50, 000
Units per buyer = 3
Therefore, Market Potential = (50, 000 * 3)
Answer = 150, 000 Units
Total Units Per year: 150, 000
Price per Unit: $25
Therefore: Market Potential in $ = (150,000 * 25)
Answer = $3,750,000
This brings it to $375,000 per year
Each Product = $25
For $375,000, how many products?
Therefore, $375,000/$25 = 15,000 units
The company needs to sell 15, 000 Units per year in order to control 10% of the market.
Question 4
Return on Investment (ROI) = Net Profit/ Investments * 100
Therefore it is (40,000/500,000) * 100
The ROI is 8%.
