Chapter 8

Chapter 8

1. Selling Price

   • price retailers charge consumers
   • Selling Price = Cost + Markup

2. Cost

   • the price retailers pay to a manufacturer

3. Markup

   • difference between cost of bringing goods into the store and the selling price
     • the amount that retailers must add to the cost of the goods to cover their operating expenses and make a profit
   • Markup = Selling Price - Cost
   • Percent Markup
     • a percent based on cost or a percent based on selling price
     • Percent Markup on cost = Dollar Markup / Cost

4. Net Profit

   • the profit remaining after subtracting the cost of bringing the goods into the store and the operating expenses from the sale of the goods

5. Breakeven Point

   • point at which costs and expenses are covered
     • Breakeven = Fixed Costs / Contribution Margin
   • Fixed Costs (FC)
     • costs that do not change with increases or decreases in sales
   • Variable Costs (VC)
     • costs that do not change in response to changes in the volume of sales
   • Contribution Margin
     • Contribution Margin = Selling Price - Variable Costs

6. Markdown

   • reductions from the original selling price caused by seasonal changes, special promos, style changes
   • Dollar Mardown = Original Selling Price - New Selling Price
   • Percent Markdown
     • Markdown Percent = Dollar Markdown / Original Selling Price

7. Perishables

   • Selling Price of Perishables = Total Dollar Sales / number units produced - Spoilage