Deck 5: Markup As a Merchandising Tool

Question 1

Determine the cost of a jacket that retails for $249 and has a 49% markup.

Answer 1

Computation of cost with markup percentage
Markup refers to the amount which is added to the actual cost of the product so as to cover profit and underlying overheads. The availability of markup and retail percentage allows the buyer to determine the cost they can afford to make payment for the merchandise so as to achieve their goal of planned markup.
Compute the cost of jacket with markup percentage of 49% and retail cost of $249 as shown below:
Hence, it is ascertained that the cost of jacket accounts for

Question 2

Find the retail price of a sofa that cost $900 and was marked up 62%.

Answer 2

Computation of retail price with markup percentage
Markup refers to the amount which is added to the actual cost of the product so as to cover profit and underlying overheads. The availability of markup and retail percentage allows the buyer to determine the cost they can afford to make payment for the merchandise so as to achieve their goal of planned markup.
Computation of cost of jacket with markup percentage of 62% and cost of sofa amounting to $900 is shown below:
Hence, retail price of sofa is

Question 3

What is the markup percent for braided belts that cost $78 a dozen and retail for $12 each?

Answer 3

Markup percentage
Markup refers to the amount which is added to the actual cost of the product so as to cover profit and underlying overheads. Markup can be expressed as a percentage or fixed amount of the selling price or total cost. Therefore markup sales are represented as percentage increase so as to ensure that company would be able to fetch adequate amount of profit margin.
Retail = $12 each
Cost = $78 per dozen
Step 1: Calculate the cost per belt.
Step 2: Calculate the Markup ($).
Now, calculate the markup percent based on retail:
Thus, the markup percent on retail is
.
Now, calculate the markup percent based on cost:
Thus, the markup percent on cost is
.

Question 4

Find the markup percent on a suit that costs $350 and retails for $680.

Question 5

A buyer purchased ties at $90 a dozen. What should be the retail price for each tie in order to achieve a 48% markup?

Question 6

Determine the markup percent for the following group of merchandise:

Question 7

A buyer plans to purchase $25,000 (retail) worth of children's coats for a back-to-school sale. He has already purchased 180 coats that cost $45 each and will retail for $80 each. What markup percent must be obtained on the balance of coats in order to average a 44.5% markup?

Question 8

During July, a buyer plans to buy gowns with a retail value of $10,000. She has purchased 150 gowns at $15.00 each that will retail for $35.00. What markup should she obtain on the remaining gowns in order to achieve a 47.5% markup goal?

Question 9

A menswear buyer needs 84 shirts to retail at $18 each and 52 pairs of slacks to retail at $35 each. He needs to average a 47.5% markup. If he pays $9.50 for each shirt, how much can he pay for each pair of slacks in order to achieve his planned markup percent?

Question 10

A buyer plans to purchase 250 towels for the store's harvest sale and to retail each towel for $7.50. He has placed an order for 128 towels that cost $3.25 each. What is the most he can pay for each of the remaining towels if he wishes to average a 42% markup?

Question 11

The sportswear buyer purchased 22 blouses at $15.00 each, 15 blouses at $12.50 each, and 27 blouses at $126 per dozen. The average markup must be 50%. What should be the retail price for each blouse if all blouses are to be sold at the same price?

Question 12

A buyer needs to average a 44% markup. She has purchased 25 flannel robes that cost $18.50 each and 32 fleece robes that cost $24 each. If she retails the flannel robes for $29 each, what must be the average retail for each fleece robe in order to achieve the planned markup percent?

Question 13

The following figures have been planned for a department:

Calculate the initial markup percent that should be used in order to arrive at the planned figures.

Question 14

Calculate the initial markup percent that will be required to achieve a 6% profit, using the following figures:

Question 15

Determine the initial markup percent for a children's department with these figures:

Question 16

The sportswear department had an opening inventory of $95,000 at cost with a markup of 45.5% on March 1. During the month, the buyer for the department purchased additional merchandise with a retail value of $50,000 with a 48% markup. Calculate the cumulative markup percent for March.

Question 17

The opening inventory for the boys' department on March 1 was $150,000 at cost and $260,000 at retail. During the month, the department received merchandise that cost $95,000 with a 51% markup. Find the cumulative markup percent.

Question 18

The net sales for a shoe department were $650,000. Calculate the maintained markup percent if the department has the following figures:

Question 19

The home-furnishings department had net sales of $420,000 and gross cost of merchandise sold of $187,500. The department's cash discounts were $3,800 and alteration costs were $2,450. Determine the maintained markup percent and the gross margin percent.

Question 20

A gift shop had a 42.5 % maintained markup. The shop did not incur any alterations or workroom costs and there were no cash discounts. Net sales were $420,000. What was the gross margin percent?

Question 21

How Can the Buyer Determine Average Cost?
Marine Aghekyan, PhD California State University at Long Beach
Jennifer has recently graduated from a university with a degree in Fashion Merchandising and has started her career as a buyer in a midsize women's apparel store in Long Beach, California. Through her educational pursuits, Jennifer worked as an intern in two different retailers as an assistant buyer. During the internship experiences, she was able to apply many of the mathematical concepts that she had learned in her merchandising courses. Jennifer's internships were very successful, and she feels excited and confident in her new position as a buyer.
The retailer where Jennifer is working as a buyer sells high-quality women's apparel and has been operating successfully for over 25 years. The owner tries to offer unique designs projecting a prestigious image. The retailer's niche market focuses on professional women who are highly educated, fashion conscious, and trendy. The retailer has developed a large number of loyal customers and has good working relationships with local vendors from whom it has bought merchandise for over 25 years.
For the upcoming season, Jennifer needs to buy 30 skirts to retail $192.00 each, 20 jackets to retail $352.00 each, and 40 dresses to retail $380.00 each. Jennifer also knows that the store markup goal is 60%. She has a budget of $10,500.00 (cost) for the entire purchase. Jennifer has visited different vendors already. She plans to buy the 30 skirts that cost $120.00 each from a new vendor and the 20 jackets that cost $220.00 each from the vendor to whom the store has a very long business relationship. Jennifer still needs to buy 40 dresses. She visited a new vendor and found dresses that cost $98.00. She thinks that these dresses fit the retailer's image and will be liked by the customers.
Using the information provided above, determine the total needs at retail.

Question 22

How Can the Buyer Determine Average Cost?
Marine Aghekyan, PhD California State University at Long Beach
Jennifer has recently graduated from a university with a degree in Fashion Merchandising and has started her career as a buyer in a midsize women's apparel store in Long Beach, California. Through her educational pursuits, Jennifer worked as an intern in two different retailers as an assistant buyer. During the internship experiences, she was able to apply many of the mathematical concepts that she had learned in her merchandising courses. Jennifer's internships were very successful, and she feels excited and confident in her new position as a buyer.
The retailer where Jennifer is working as a buyer sells high-quality women's apparel and has been operating successfully for over 25 years. The owner tries to offer unique designs projecting a prestigious image. The retailer's niche market focuses on professional women who are highly educated, fashion conscious, and trendy. The retailer has developed a large number of loyal customers and has good working relationships with local vendors from whom it has bought merchandise for over 25 years.
For the upcoming season, Jennifer needs to buy 30 skirts to retail $192.00 each, 20 jackets to retail $352.00 each, and 40 dresses to retail $380.00 each. Jennifer also knows that the store markup goal is 60%. She has a budget of $10,500.00 (cost) for the entire purchase. Jennifer has visited different vendors already. She plans to buy the 30 skirts that cost $120.00 each from a new vendor and the 20 jackets that cost $220.00 each from the vendor to whom the store has a very long business relationship. Jennifer still needs to buy 40 dresses. She visited a new vendor and found dresses that cost $98.00. She thinks that these dresses fit the retailer's image and will be liked by the customers.
In order to calculate the maximum amount Jennifer can pay for the dresses, she needs to know the total needs at cost. If you were Jennifer how would you calculate total needs at cost?

Question 23

How Can the Buyer Determine Average Cost?
Marine Aghekyan, PhD California State University at Long Beach
Jennifer has recently graduated from a university with a degree in Fashion Merchandising and has started her career as a buyer in a midsize women's apparel store in Long Beach, California. Through her educational pursuits, Jennifer worked as an intern in two different retailers as an assistant buyer. During the internship experiences, she was able to apply many of the mathematical concepts that she had learned in her merchandising courses. Jennifer's internships were very successful, and she feels excited and confident in her new position as a buyer.
The retailer where Jennifer is working as a buyer sells high-quality women's apparel and has been operating successfully for over 25 years. The owner tries to offer unique designs projecting a prestigious image. The retailer's niche market focuses on professional women who are highly educated, fashion conscious, and trendy. The retailer has developed a large number of loyal customers and has good working relationships with local vendors from whom it has bought merchandise for over 25 years.
For the upcoming season, Jennifer needs to buy 30 skirts to retail $192.00 each, 20 jackets to retail $352.00 each, and 40 dresses to retail $380.00 each. Jennifer also knows that the store markup goal is 60%. She has a budget of $10,500.00 (cost) for the entire purchase. Jennifer has visited different vendors already. She plans to buy the 30 skirts that cost $120.00 each from a new vendor and the 20 jackets that cost $220.00 each from the vendor to whom the store has a very long business relationship. Jennifer still needs to buy 40 dresses. She visited a new vendor and found dresses that cost $98.00. She thinks that these dresses fit the retailer's image and will be liked by the customers.
Having done all the calculations, how can Jennifer identify unit cost for each dress? What is the most Jennifer can pay for each dress? If you were Jennifer would you purchase the $98.00 dress from the new vendor?

Question 24

How Can the Buyer Determine Average Cost?
Marine Aghekyan, PhD California State University at Long Beach
Jennifer has recently graduated from a university with a degree in Fashion Merchandising and has started her career as a buyer in a midsize women's apparel store in Long Beach, California. Through her educational pursuits, Jennifer worked as an intern in two different retailers as an assistant buyer. During the internship experiences, she was able to apply many of the mathematical concepts that she had learned in her merchandising courses. Jennifer's internships were very successful, and she feels excited and confident in her new position as a buyer.
The retailer where Jennifer is working as a buyer sells high-quality women's apparel and has been operating successfully for over 25 years. The owner tries to offer unique designs projecting a prestigious image. The retailer's niche market focuses on professional women who are highly educated, fashion conscious, and trendy. The retailer has developed a large number of loyal customers and has good working relationships with local vendors from whom it has bought merchandise for over 25 years.
For the upcoming season, Jennifer needs to buy 30 skirts to retail $192.00 each, 20 jackets to retail $352.00 each, and 40 dresses to retail $380.00 each. Jennifer also knows that the store markup goal is 60%. She has a budget of $10,500.00 (cost) for the entire purchase. Jennifer has visited different vendors already. She plans to buy the 30 skirts that cost $120.00 each from a new vendor and the 20 jackets that cost $220.00 each from the vendor to whom the store has a very long business relationship. Jennifer still needs to buy 40 dresses. She visited a new vendor and found dresses that cost $98.00. She thinks that these dresses fit the retailer's image and will be liked by the customers.
Is Jennifer having a problem in her budgeting? If yes, explain why. What would you recommend her to solve the problem?

Question 25

Calculating Initial Markup and Average Markup
Tammy Robinson, Ph.D. and Farrell Doss, Ph.D. Radford University
Christy Williams is a recent graduate from Mason College, where she majored in Fashion Merchandising. After several interviews, she was pleased to accept a job as Assistant Store Manager at Kayla's Specialty Store, a small specialty store that sells women's apparel and accessories. She assists the owner, Mrs. Allen, with purchasing and pricing merchandise.
On the fall buying trip, Mrs. Allen purchased two items from one vendor. They included 2 dozen sweaters for the fall season with a cost price of $32 and 3 dozen coordinating blouses with a cost price of $24. Although Mrs. Allen felt strongly about these purchases, she did not find a selection of skirts and pants from this vendor to meet her customers' needs.
During the same buying trip, Mrs. Allen discovered a new vendor and was able to secure a great deal on some skirts and pants that can be grouped with the sweaters and blouses on the sales floor. Twelve skirts were purchased for a cost of $20 each. They will retail for $42 each. Also purchased were 18 pairs of pants for $18 each, which will retail for $38 each. Mrs. Allen has asked Christy to calculate the average markup of this group to ensure the store's planned markup of 51.6% will be met.
After reviewing the store's figures, Christy produced the following numbers: During the last quarter, expenses have averaged 35%, markdowns have averaged 12%, and profit has averaged 4.5%. The store's planned sales are $325,000. Using this information, Christy must determine the initial retail price of the new fall sweaters and blouses.
Using the information provided by Christy, determine the initial markup percent and the initial retail price for the new fall sweaters and blouses.

Question 26

Calculating Initial Markup and Average Markup
Tammy Robinson, Ph.D. and Farrell Doss, Ph.D. Radford University
Christy Williams is a recent graduate from Mason College, where she majored in Fashion Merchandising. After several interviews, she was pleased to accept a job as Assistant Store Manager at Kayla's Specialty Store, a small specialty store that sells women's apparel and accessories. She assists the owner, Mrs. Allen, with purchasing and pricing merchandise.
On the fall buying trip, Mrs. Allen purchased two items from one vendor. They included 2 dozen sweaters for the fall season with a cost price of $32 and 3 dozen coordinating blouses with a cost price of $24. Although Mrs. Allen felt strongly about these purchases, she did not find a selection of skirts and pants from this vendor to meet her customers' needs.
During the same buying trip, Mrs. Allen discovered a new vendor and was able to secure a great deal on some skirts and pants that can be grouped with the sweaters and blouses on the sales floor. Twelve skirts were purchased for a cost of $20 each. They will retail for $42 each. Also purchased were 18 pairs of pants for $18 each, which will retail for $38 each. Mrs. Allen has asked Christy to calculate the average markup of this group to ensure the store's planned markup of 51.6% will be met.
After reviewing the store's figures, Christy produced the following numbers: During the last quarter, expenses have averaged 35%, markdowns have averaged 12%, and profit has averaged 4.5%. The store's planned sales are $325,000. Using this information, Christy must determine the initial retail price of the new fall sweaters and blouses.
Using price information calculated in Question 1, state what actual retail price Christy might suggest for these fall sweaters and blouses and why she would suggest that price.

Question 27

Calculating Initial Markup and Average Markup
Tammy Robinson, Ph.D. and Farrell Doss, Ph.D. Radford University
Christy Williams is a recent graduate from Mason College, where she majored in Fashion Merchandising. After several interviews, she was pleased to accept a job as Assistant Store Manager at Kayla's Specialty Store, a small specialty store that sells women's apparel and accessories. She assists the owner, Mrs. Allen, with purchasing and pricing merchandise.
On the fall buying trip, Mrs. Allen purchased two items from one vendor. They included 2 dozen sweaters for the fall season with a cost price of $32 and 3 dozen coordinating blouses with a cost price of $24. Although Mrs. Allen felt strongly about these purchases, she did not find a selection of skirts and pants from this vendor to meet her customers' needs.
During the same buying trip, Mrs. Allen discovered a new vendor and was able to secure a great deal on some skirts and pants that can be grouped with the sweaters and blouses on the sales floor. Twelve skirts were purchased for a cost of $20 each. They will retail for $42 each. Also purchased were 18 pairs of pants for $18 each, which will retail for $38 each. Mrs. Allen has asked Christy to calculate the average markup of this group to ensure the store's planned markup of 51.6% will be met.
After reviewing the store's figures, Christy produced the following numbers: During the last quarter, expenses have averaged 35%, markdowns have averaged 12%, and profit has averaged 4.5%. The store's planned sales are $325,000. Using this information, Christy must determine the initial retail price of the new fall sweaters and blouses.
What would be the average markup percent for this grouping of sweaters, blouses, skirts, and pants?

Question 28

Calculating Initial Markup and Average Markup
Tammy Robinson, Ph.D. and Farrell Doss, Ph.D. Radford University
Christy Williams is a recent graduate from Mason College, where she majored in Fashion Merchandising. After several interviews, she was pleased to accept a job as Assistant Store Manager at Kayla's Specialty Store, a small specialty store that sells women's apparel and accessories. She assists the owner, Mrs. Allen, with purchasing and pricing merchandise.
On the fall buying trip, Mrs. Allen purchased two items from one vendor. They included 2 dozen sweaters for the fall season with a cost price of $32 and 3 dozen coordinating blouses with a cost price of $24. Although Mrs. Allen felt strongly about these purchases, she did not find a selection of skirts and pants from this vendor to meet her customers' needs.
During the same buying trip, Mrs. Allen discovered a new vendor and was able to secure a great deal on some skirts and pants that can be grouped with the sweaters and blouses on the sales floor. Twelve skirts were purchased for a cost of $20 each. They will retail for $42 each. Also purchased were 18 pairs of pants for $18 each, which will retail for $38 each. Mrs. Allen has asked Christy to calculate the average markup of this group to ensure the store's planned markup of 51.6% will be met.
After reviewing the store's figures, Christy produced the following numbers: During the last quarter, expenses have averaged 35%, markdowns have averaged 12%, and profit has averaged 4.5%. The store's planned sales are $325,000. Using this information, Christy must determine the initial retail price of the new fall sweaters and blouses.
The store wants to achieve a 51.6% markup. How does the average markup, that was calculated in Question 3, compare to the store's goal? What can be done to help bring the markup percent closer to the desired goal?

Question 29

Operating a Successful Bridal Business
Wanda K. Cheek, Ph.D., Mississippi State University
You are the owner of a soon-to-open bridal store in a college town, with a population of 45,000. You began work on the business plan over a year ago, but are now within six months of the grand opening. It is time to make serious decisions concerning the financial aspects of merchandising a fashion-oriented business. Understanding markup and competitive retail pricing is an important part of the successful operation of this business.
Many merchandising and retailing students do not understand the unique structure of the retail bridal business and how it is different from most fashion businesses. The following background information is presented to clarify the differences.
First, to get into the retail bridal business, a bridal business owner carefully researches specialized bridal markets for dresses and accessories, such as the National Bridal Show at The Merchandise Mart in Chicago. There are two specialized bridal markets per year: (1) fall market in September or October for upcoming spring/summer weddings [merchandise arrives in stores in January and February] and (2) spring market in March or April for upcoming fall/winter weddings [merchandise arrives in stores in August and September]. Most bridal businesses make most purchases at fall market, since the upcoming spring and summer wedding season is by far the largest selling season of all. Business profits hinge on the success of sales during this season.
Another major difference in the bridal business, compared to other fashion retailing business structures, is that the owner only purchases sample dresses at the market. Therefore, inventory expenditures are greatly reduced, because a small store such as yours will only have about 80-90 dresses hanging in stock. Since all will be sample dresses that any bride may choose, it is important to specify sizes that can be pinned up or expanded as needed. Therefore, sizes 10, 12, 14, and 16 are popular sample sizes, with a few styles for larger sizes (up to 26). Small sample sizes such as 2 and 4 would most likely be the least useful. Therefore, sales persons need to be experienced and proficient in measuring and determining actual sizes to order.
Because the dresses will then need to be sewn by the manufacturer, bridal gown orders should ideally be placed at least six months in advance of the wedding to allow for arrival and alterations. At a minimum, gowns take three to four months for completion and delivery, depending on the designer. Rush orders are available for an extra fee, but six to eight weeks is usually required. Thus, order completion time is slow. To discourage brides who change their minds, a 60% nonrefundable deposit is generally required at the time the order is placed. Thus, return on investment in sample size stock is slow. However, since most orders will be custom, the trade-off is that markdowns on bridal gowns will be almost limited to the markdowns on sample gowns that are sold at the end of the order season (generally January and July sales).
In the trade (wholesale and retail), markup on bridal gowns is often discussed in terms of markup based on cost, rather than markup based on retail. Earlier in this chapter, keystone markup was defined as a markup that doubles the cost of the merchandise. Thus, for keystone markup, a 2.0 factor is used since the retail price is twice the cost. Bridal owners often use a markup that is more than a 2.0 factor, such as a 2.5 factor or even greater (3.0). This means that the wholesale cost is multiplied by 2.5 or 3.0, etc., to determine the $ Retail. In effect this is the same as doubling (or tripling with a factor of 3.0) the wholesale cost and adding an additional amount to ensure profitability. It is important to remember that the retail markup percent can be calculated from this information. In the bridal business, an ideal $ Retail is based on an Initial Markup (retail) % of 60% or a 2.5 factor.
Other issues in the bridal business that impact profitability and markup are transportation and alterations. In the bridal business, these expenses are pricey, compared to expenses in other types of fashion retailers. The current cost for shipping for each dress is about $20. Simple alterations begin at $40 for hemming and a bust adjustment for strapless gowns, depending on the area of the country, and prices go from that point. As the owner of the business, you must decide whether you will build these expenses into markup. In some bridal stores, each of these is added as an extra expense to be paid by the bride above the quoted $ Retail. The pricing philosophy is that treating these separately keeps the $ Retail price competitive.
Determine the Retail Markup% for a famous brand gown with a wholesale cost of $650 and a manufacturer's suggested retail price of $1,600. Then calculate the markup factor based on cost.

Question 30

Operating a Successful Bridal Business
Wanda K. Cheek, Ph.D., Mississippi State University
You are the owner of a soon-to-open bridal store in a college town, with a population of 45,000. You began work on the business plan over a year ago, but are now within six months of the grand opening. It is time to make serious decisions concerning the financial aspects of merchandising a fashion-oriented business. Understanding markup and competitive retail pricing is an important part of the successful operation of this business.
Many merchandising and retailing students do not understand the unique structure of the retail bridal business and how it is different from most fashion businesses. The following background information is presented to clarify the differences.
First, to get into the retail bridal business, a bridal business owner carefully researches specialized bridal markets for dresses and accessories, such as the National Bridal Show at The Merchandise Mart in Chicago. There are two specialized bridal markets per year: (1) fall market in September or October for upcoming spring/summer weddings [merchandise arrives in stores in January and February] and (2) spring market in March or April for upcoming fall/winter weddings [merchandise arrives in stores in August and September]. Most bridal businesses make most purchases at fall market, since the upcoming spring and summer wedding season is by far the largest selling season of all. Business profits hinge on the success of sales during this season.
Another major difference in the bridal business, compared to other fashion retailing business structures, is that the owner only purchases sample dresses at the market. Therefore, inventory expenditures are greatly reduced, because a small store such as yours will only have about 80-90 dresses hanging in stock. Since all will be sample dresses that any bride may choose, it is important to specify sizes that can be pinned up or expanded as needed. Therefore, sizes 10, 12, 14, and 16 are popular sample sizes, with a few styles for larger sizes (up to 26). Small sample sizes such as 2 and 4 would most likely be the least useful. Therefore, sales persons need to be experienced and proficient in measuring and determining actual sizes to order.
Because the dresses will then need to be sewn by the manufacturer, bridal gown orders should ideally be placed at least six months in advance of the wedding to allow for arrival and alterations. At a minimum, gowns take three to four months for completion and delivery, depending on the designer. Rush orders are available for an extra fee, but six to eight weeks is usually required. Thus, order completion time is slow. To discourage brides who change their minds, a 60% nonrefundable deposit is generally required at the time the order is placed. Thus, return on investment in sample size stock is slow. However, since most orders will be custom, the trade-off is that markdowns on bridal gowns will be almost limited to the markdowns on sample gowns that are sold at the end of the order season (generally January and July sales).
In the trade (wholesale and retail), markup on bridal gowns is often discussed in terms of markup based on cost, rather than markup based on retail. Earlier in this chapter, keystone markup was defined as a markup that doubles the cost of the merchandise. Thus, for keystone markup, a 2.0 factor is used since the retail price is twice the cost. Bridal owners often use a markup that is more than a 2.0 factor, such as a 2.5 factor or even greater (3.0). This means that the wholesale cost is multiplied by 2.5 or 3.0, etc., to determine the $ Retail. In effect this is the same as doubling (or tripling with a factor of 3.0) the wholesale cost and adding an additional amount to ensure profitability. It is important to remember that the retail markup percent can be calculated from this information. In the bridal business, an ideal $ Retail is based on an Initial Markup (retail) % of 60% or a 2.5 factor.
Other issues in the bridal business that impact profitability and markup are transportation and alterations. In the bridal business, these expenses are pricey, compared to expenses in other types of fashion retailers. The current cost for shipping for each dress is about $20. Simple alterations begin at $40 for hemming and a bust adjustment for strapless gowns, depending on the area of the country, and prices go from that point. As the owner of the business, you must decide whether you will build these expenses into markup. In some bridal stores, each of these is added as an extra expense to be paid by the bride above the quoted $ Retail. The pricing philosophy is that treating these separately keeps the $ Retail price competitive.
Using the figures below, determine the $ Retail based on cost and the Retail Markup % Equivalent for dress style # 1001. Calculate the answers manually and then by spreadsheet.

Question 31

Operating a Successful Bridal Business
Wanda K. Cheek, Ph.D., Mississippi State University
You are the owner of a soon-to-open bridal store in a college town, with a population of 45,000. You began work on the business plan over a year ago, but are now within six months of the grand opening. It is time to make serious decisions concerning the financial aspects of merchandising a fashion-oriented business. Understanding markup and competitive retail pricing is an important part of the successful operation of this business.
Many merchandising and retailing students do not understand the unique structure of the retail bridal business and how it is different from most fashion businesses. The following background information is presented to clarify the differences.
First, to get into the retail bridal business, a bridal business owner carefully researches specialized bridal markets for dresses and accessories, such as the National Bridal Show at The Merchandise Mart in Chicago. There are two specialized bridal markets per year: (1) fall market in September or October for upcoming spring/summer weddings [merchandise arrives in stores in January and February] and (2) spring market in March or April for upcoming fall/winter weddings [merchandise arrives in stores in August and September]. Most bridal businesses make most purchases at fall market, since the upcoming spring and summer wedding season is by far the largest selling season of all. Business profits hinge on the success of sales during this season.
Another major difference in the bridal business, compared to other fashion retailing business structures, is that the owner only purchases sample dresses at the market. Therefore, inventory expenditures are greatly reduced, because a small store such as yours will only have about 80-90 dresses hanging in stock. Since all will be sample dresses that any bride may choose, it is important to specify sizes that can be pinned up or expanded as needed. Therefore, sizes 10, 12, 14, and 16 are popular sample sizes, with a few styles for larger sizes (up to 26). Small sample sizes such as 2 and 4 would most likely be the least useful. Therefore, sales persons need to be experienced and proficient in measuring and determining actual sizes to order.
Because the dresses will then need to be sewn by the manufacturer, bridal gown orders should ideally be placed at least six months in advance of the wedding to allow for arrival and alterations. At a minimum, gowns take three to four months for completion and delivery, depending on the designer. Rush orders are available for an extra fee, but six to eight weeks is usually required. Thus, order completion time is slow. To discourage brides who change their minds, a 60% nonrefundable deposit is generally required at the time the order is placed. Thus, return on investment in sample size stock is slow. However, since most orders will be custom, the trade-off is that markdowns on bridal gowns will be almost limited to the markdowns on sample gowns that are sold at the end of the order season (generally January and July sales).
In the trade (wholesale and retail), markup on bridal gowns is often discussed in terms of markup based on cost, rather than markup based on retail. Earlier in this chapter, keystone markup was defined as a markup that doubles the cost of the merchandise. Thus, for keystone markup, a 2.0 factor is used since the retail price is twice the cost. Bridal owners often use a markup that is more than a 2.0 factor, such as a 2.5 factor or even greater (3.0). This means that the wholesale cost is multiplied by 2.5 or 3.0, etc., to determine the $ Retail. In effect this is the same as doubling (or tripling with a factor of 3.0) the wholesale cost and adding an additional amount to ensure profitability. It is important to remember that the retail markup percent can be calculated from this information. In the bridal business, an ideal $ Retail is based on an Initial Markup (retail) % of 60% or a 2.5 factor.
Other issues in the bridal business that impact profitability and markup are transportation and alterations. In the bridal business, these expenses are pricey, compared to expenses in other types of fashion retailers. The current cost for shipping for each dress is about $20. Simple alterations begin at $40 for hemming and a bust adjustment for strapless gowns, depending on the area of the country, and prices go from that point. As the owner of the business, you must decide whether you will build these expenses into markup. In some bridal stores, each of these is added as an extra expense to be paid by the bride above the quoted $ Retail. The pricing philosophy is that treating these separately keeps the $ Retail price competitive.
For the same dress style# 1001, calculate the $ Retail assuming a 60% retail markup. Then add a transportation charge of $20 and an alteration charge of $40 to determine the final cost to the bride.

Question 32

Operating a Successful Bridal Business
Wanda K. Cheek, Ph.D., Mississippi State University
You are the owner of a soon-to-open bridal store in a college town, with a population of 45,000. You began work on the business plan over a year ago, but are now within six months of the grand opening. It is time to make serious decisions concerning the financial aspects of merchandising a fashion-oriented business. Understanding markup and competitive retail pricing is an important part of the successful operation of this business.
Many merchandising and retailing students do not understand the unique structure of the retail bridal business and how it is different from most fashion businesses. The following background information is presented to clarify the differences.
First, to get into the retail bridal business, a bridal business owner carefully researches specialized bridal markets for dresses and accessories, such as the National Bridal Show at The Merchandise Mart in Chicago. There are two specialized bridal markets per year: (1) fall market in September or October for upcoming spring/summer weddings [merchandise arrives in stores in January and February] and (2) spring market in March or April for upcoming fall/winter weddings [merchandise arrives in stores in August and September]. Most bridal businesses make most purchases at fall market, since the upcoming spring and summer wedding season is by far the largest selling season of all. Business profits hinge on the success of sales during this season.
Another major difference in the bridal business, compared to other fashion retailing business structures, is that the owner only purchases sample dresses at the market. Therefore, inventory expenditures are greatly reduced, because a small store such as yours will only have about 80-90 dresses hanging in stock. Since all will be sample dresses that any bride may choose, it is important to specify sizes that can be pinned up or expanded as needed. Therefore, sizes 10, 12, 14, and 16 are popular sample sizes, with a few styles for larger sizes (up to 26). Small sample sizes such as 2 and 4 would most likely be the least useful. Therefore, sales persons need to be experienced and proficient in measuring and determining actual sizes to order.
Because the dresses will then need to be sewn by the manufacturer, bridal gown orders should ideally be placed at least six months in advance of the wedding to allow for arrival and alterations. At a minimum, gowns take three to four months for completion and delivery, depending on the designer. Rush orders are available for an extra fee, but six to eight weeks is usually required. Thus, order completion time is slow. To discourage brides who change their minds, a 60% nonrefundable deposit is generally required at the time the order is placed. Thus, return on investment in sample size stock is slow. However, since most orders will be custom, the trade-off is that markdowns on bridal gowns will be almost limited to the markdowns on sample gowns that are sold at the end of the order season (generally January and July sales).
In the trade (wholesale and retail), markup on bridal gowns is often discussed in terms of markup based on cost, rather than markup based on retail. Earlier in this chapter, keystone markup was defined as a markup that doubles the cost of the merchandise. Thus, for keystone markup, a 2.0 factor is used since the retail price is twice the cost. Bridal owners often use a markup that is more than a 2.0 factor, such as a 2.5 factor or even greater (3.0). This means that the wholesale cost is multiplied by 2.5 or 3.0, etc., to determine the $ Retail. In effect this is the same as doubling (or tripling with a factor of 3.0) the wholesale cost and adding an additional amount to ensure profitability. It is important to remember that the retail markup percent can be calculated from this information. In the bridal business, an ideal $ Retail is based on an Initial Markup (retail) % of 60% or a 2.5 factor.
Other issues in the bridal business that impact profitability and markup are transportation and alterations. In the bridal business, these expenses are pricey, compared to expenses in other types of fashion retailers. The current cost for shipping for each dress is about $20. Simple alterations begin at $40 for hemming and a bust adjustment for strapless gowns, depending on the area of the country, and prices go from that point. As the owner of the business, you must decide whether you will build these expenses into markup. In some bridal stores, each of these is added as an extra expense to be paid by the bride above the quoted $ Retail. The pricing philosophy is that treating these separately keeps the $ Retail price competitive.
In reference to question #3, what do you think is the best method for a final $ Retail for the bridal gown? (a) Continue to mark the $ Retail at $625 and collect a separate charge of $20 for transportation and arrange a final fitting session with an alterations person in your store but let the bride pay that person's charge directly to him/her OR (b) Increase the $ Retail to include both a standard alteration charge and a standard delivery charge. Discuss the pros and cons of each.

Question 33

Operating a Successful Bridal Business
Wanda K. Cheek, Ph.D., Mississippi State University
You are the owner of a soon-to-open bridal store in a college town, with a population of 45,000. You began work on the business plan over a year ago, but are now within six months of the grand opening. It is time to make serious decisions concerning the financial aspects of merchandising a fashion-oriented business. Understanding markup and competitive retail pricing is an important part of the successful operation of this business.
Many merchandising and retailing students do not understand the unique structure of the retail bridal business and how it is different from most fashion businesses. The following background information is presented to clarify the differences.
First, to get into the retail bridal business, a bridal business owner carefully researches specialized bridal markets for dresses and accessories, such as the National Bridal Show at The Merchandise Mart in Chicago. There are two specialized bridal markets per year: (1) fall market in September or October for upcoming spring/summer weddings [merchandise arrives in stores in January and February] and (2) spring market in March or April for upcoming fall/winter weddings [merchandise arrives in stores in August and September]. Most bridal businesses make most purchases at fall market, since the upcoming spring and summer wedding season is by far the largest selling season of all. Business profits hinge on the success of sales during this season.
Another major difference in the bridal business, compared to other fashion retailing business structures, is that the owner only purchases sample dresses at the market. Therefore, inventory expenditures are greatly reduced, because a small store such as yours will only have about 80-90 dresses hanging in stock. Since all will be sample dresses that any bride may choose, it is important to specify sizes that can be pinned up or expanded as needed. Therefore, sizes 10, 12, 14, and 16 are popular sample sizes, with a few styles for larger sizes (up to 26). Small sample sizes such as 2 and 4 would most likely be the least useful. Therefore, sales persons need to be experienced and proficient in measuring and determining actual sizes to order.
Because the dresses will then need to be sewn by the manufacturer, bridal gown orders should ideally be placed at least six months in advance of the wedding to allow for arrival and alterations. At a minimum, gowns take three to four months for completion and delivery, depending on the designer. Rush orders are available for an extra fee, but six to eight weeks is usually required. Thus, order completion time is slow. To discourage brides who change their minds, a 60% nonrefundable deposit is generally required at the time the order is placed. Thus, return on investment in sample size stock is slow. However, since most orders will be custom, the trade-off is that markdowns on bridal gowns will be almost limited to the markdowns on sample gowns that are sold at the end of the order season (generally January and July sales).
In the trade (wholesale and retail), markup on bridal gowns is often discussed in terms of markup based on cost, rather than markup based on retail. Earlier in this chapter, keystone markup was defined as a markup that doubles the cost of the merchandise. Thus, for keystone markup, a 2.0 factor is used since the retail price is twice the cost. Bridal owners often use a markup that is more than a 2.0 factor, such as a 2.5 factor or even greater (3.0). This means that the wholesale cost is multiplied by 2.5 or 3.0, etc., to determine the $ Retail. In effect this is the same as doubling (or tripling with a factor of 3.0) the wholesale cost and adding an additional amount to ensure profitability. It is important to remember that the retail markup percent can be calculated from this information. In the bridal business, an ideal $ Retail is based on an Initial Markup (retail) % of 60% or a 2.5 factor.
Other issues in the bridal business that impact profitability and markup are transportation and alterations. In the bridal business, these expenses are pricey, compared to expenses in other types of fashion retailers. The current cost for shipping for each dress is about $20. Simple alterations begin at $40 for hemming and a bust adjustment for strapless gowns, depending on the area of the country, and prices go from that point. As the owner of the business, you must decide whether you will build these expenses into markup. In some bridal stores, each of these is added as an extra expense to be paid by the bride above the quoted $ Retail. The pricing philosophy is that treating these separately keeps the $ Retail price competitive.
Since markup percentages can be "controlled" in the bridal market through manufacturer's suggested prices and bridal is a seasonal market, what are some additional product categories (other than bridal gowns) that you could offer in your store to improve maintained markup and also offer the customer a full-service, one-stop package?

Question 34

Operating a Successful Bridal Business
Wanda K. Cheek, Ph.D., Mississippi State University
You are the owner of a soon-to-open bridal store in a college town, with a population of 45,000. You began work on the business plan over a year ago, but are now within six months of the grand opening. It is time to make serious decisions concerning the financial aspects of merchandising a fashion-oriented business. Understanding markup and competitive retail pricing is an important part of the successful operation of this business.
Many merchandising and retailing students do not understand the unique structure of the retail bridal business and how it is different from most fashion businesses. The following background information is presented to clarify the differences.
First, to get into the retail bridal business, a bridal business owner carefully researches specialized bridal markets for dresses and accessories, such as the National Bridal Show at The Merchandise Mart in Chicago. There are two specialized bridal markets per year: (1) fall market in September or October for upcoming spring/summer weddings [merchandise arrives in stores in January and February] and (2) spring market in March or April for upcoming fall/winter weddings [merchandise arrives in stores in August and September]. Most bridal businesses make most purchases at fall market, since the upcoming spring and summer wedding season is by far the largest selling season of all. Business profits hinge on the success of sales during this season.
Another major difference in the bridal business, compared to other fashion retailing business structures, is that the owner only purchases sample dresses at the market. Therefore, inventory expenditures are greatly reduced, because a small store such as yours will only have about 80-90 dresses hanging in stock. Since all will be sample dresses that any bride may choose, it is important to specify sizes that can be pinned up or expanded as needed. Therefore, sizes 10, 12, 14, and 16 are popular sample sizes, with a few styles for larger sizes (up to 26). Small sample sizes such as 2 and 4 would most likely be the least useful. Therefore, sales persons need to be experienced and proficient in measuring and determining actual sizes to order.
Because the dresses will then need to be sewn by the manufacturer, bridal gown orders should ideally be placed at least six months in advance of the wedding to allow for arrival and alterations. At a minimum, gowns take three to four months for completion and delivery, depending on the designer. Rush orders are available for an extra fee, but six to eight weeks is usually required. Thus, order completion time is slow. To discourage brides who change their minds, a 60% nonrefundable deposit is generally required at the time the order is placed. Thus, return on investment in sample size stock is slow. However, since most orders will be custom, the trade-off is that markdowns on bridal gowns will be almost limited to the markdowns on sample gowns that are sold at the end of the order season (generally January and July sales).
In the trade (wholesale and retail), markup on bridal gowns is often discussed in terms of markup based on cost, rather than markup based on retail. Earlier in this chapter, keystone markup was defined as a markup that doubles the cost of the merchandise. Thus, for keystone markup, a 2.0 factor is used since the retail price is twice the cost. Bridal owners often use a markup that is more than a 2.0 factor, such as a 2.5 factor or even greater (3.0). This means that the wholesale cost is multiplied by 2.5 or 3.0, etc., to determine the $ Retail. In effect this is the same as doubling (or tripling with a factor of 3.0) the wholesale cost and adding an additional amount to ensure profitability. It is important to remember that the retail markup percent can be calculated from this information. In the bridal business, an ideal $ Retail is based on an Initial Markup (retail) % of 60% or a 2.5 factor.
Other issues in the bridal business that impact profitability and markup are transportation and alterations. In the bridal business, these expenses are pricey, compared to expenses in other types of fashion retailers. The current cost for shipping for each dress is about $20. Simple alterations begin at $40 for hemming and a bust adjustment for strapless gowns, depending on the area of the country, and prices go from that point. As the owner of the business, you must decide whether you will build these expenses into markup. In some bridal stores, each of these is added as an extra expense to be paid by the bride above the quoted $ Retail. The pricing philosophy is that treating these separately keeps the $ Retail price competitive.
Since bridal retailers often refer to markup in terms such as 2.1 or 2.5, based on cost, why should a student of retail merchandising know how to calculate markup based on both $ Retail and $ Cost?

Question 35

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Question 36

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Question 37

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Question 38

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Question 39

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Question 40

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Question 41

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Question 42

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Question 43

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Question 44

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Question 45

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Question 46

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Question 47

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Question 48

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Question 49

Hand-tooled belts for the men's department cost $180 a dozen. If a
markup is required, what unit retail would achieve this markup?

Question 50

Find the cost of a dress that retails for $185 and has a 55% markup.

Question 51

What retail price on a walnut entertainment center that costs $2,500 would provide a 58% markup?

Question 52

Determine the markup percent on a child's hand-smocked dress that cost $45 and retails for $110.

Question 53

A buyer of men's furnishings paid $168 per dozen for jute belts. What unit retail will provide a 52.25% markup?

Question 54

A furniture store's feature of the week is a cherry table that retails for $1,200 with a 64% markup. Find the cost of the table.

Question 55

The paint department received a shipment of brushes that costs $4.50 each and retails for $9.75 each. Find the (a) cost percent and the (b) markup percent.

Question 56

Find the (a) cost percent and (b) dollar cost for a scarf that retails for $18 and was marked up 40.5%?

Question 57

Determine the markup percent for hand-blown wine glasses costing $132 a dozen and retailing for $22 each.

Question 58

Determine the markup percent (a) based on retail and (b) based on cost for an antique mirror that the buyer purchased for $850 and priced at retail for $1,500.

Question 59

Determine the markup percent on the following order:

Question 60

A buyer coordinated a special purchase of men's shirts from a manufacturer. Determine the markup percent on this purchase:

Question 61

Find the markup percent on this order that a buyer purchased for a special sale:
100 hand towels costing $22.80/dozen, to sell at $3.50 each
dozen washcloths costing $1.20 each, to sell at $2.10 each
85 bath towels costing $4.25 each, to sell at $8.00 each
dozen beach towels costing $5.50 each, to sell at $10.98 each

Question 62

Determine the markup percent on the following purchase for a handbag department:

Question 63

What is the markup percent on the following order?

Question 64

The buyer needs a group of T-shirts for a special sale. He buys 40 dozen at $84/dozen, 20 dozen at $96/dozen, and 15 dozen at $120/dozen. If he marks them all at a sale price of $18.00 each, what markup percent is realized on the merchandise?

Question 65

A buyer purchased the following rugs:

The average markup percent must be 52%. What should be the retail price for each rug if all rugs are to be sold at the same price?

Question 66

A buyer plans to purchase 400 skirts that will retail for $120 each. She has already placed an order for 320 skirts at $48 each (cost). What is the most she can pay for each of the remaining skirts if she is to obtain the departmental markup of 56.5%?

Question 67

The owner of The Perfect Florist Shop intends to buy vases with a retail value of $14,000. He has purchased 200 vases at $14 each that will retail for $32 each. What markup should he obtain on the remaining vases in order to achieve a 62% markup goal?

Question 68

For a holiday catalog, a buyer purchased the following decorative items at a manufacturer's closeout sale:

If all decorative pieces are to be retailed at the same price, what unit retail price will result in a 61.25% markup?

Question 69

A buyer for a small sporting goods store needs to purchase merchandise with a cost of $10,000. She has purchased football jerseys costing $8,000 that will retail for $14,000. If she is to achieve a 51.5% markup goal, what markup percent will be needed on the remainder of the goods?

Question 70

For a special sale, a buyer plans to purchase 150 blouses that will retail for $48 each. She has already ordered 80 blouses at $20 (cost) each. What is the most she can pay for each remaining blouse if she is to achieve the department's average markup goal of 60%?

Question 71

For a Christmas catalog, a buyer plans to purchase 500 bird feeders to retail for $45 each. He placed an order for 350 feeders that cost $25 each. What is the most he can pay for each of the remaining feeders if he wishes to average a 42% markup?

Question 72

A buyer for women's sportswear purchased 10 cotton sweaters at $52 each and 22 linen sweaters at $66 each. If all sweaters are to be retailed at the same price, what average retail will provide a 52% markup?

Question 73

During the month, a buyer plans to purchase damask tablecloths that cost $8,000. He has purchased tablecloths that cost $2,000 and will retail for $3,800. What markup percent should the buyer obtain on the balance of his purchases in order to obtain a markup of 60%?

Question 74

A buyer needs to purchase 200 scarves to sell for $25 each. He has ordered 140 scarves at $10 each (cost). What is the most he can pay for each of the remaining scarves in order to obtain an average markup of 54%?

Question 75

A buyer needs to average a 57% markup. He has purchased 50 silk jackets that cost $78 each and 38 wool jackets that cost $60 each. If he plans to retail the silk jackets for $175 each, what must be the average retail price for each of the wool jackets in order to maintain the planned markup percent?

Question 76

The buyer in the juniors' department plans to purchase $45,000 (retail) worth of jackets. She has purchased
dozen jackets costing $80 each that she plans to sell for $140 each at retail price. What markup percent must be obtained on the balance of the jackets in order to average a 53% markup?

Question 77

A buyer plans to purchase $30,000 (retail) worth of comforters. She purchased
dozen comforters costing $90 each, which she plans to sell for $180 each at retail price. What markup percent must be obtained on the balance of the comforters in order to average a 48% markup?

Question 78

During July, a buyer plans to buy suits with a retail value of $120,000. He has purchased 300 suits at $90 each that will retail for $200 each. What markup percent should he obtain on the remaining suits in order to achieve a 57% markup goal?

Question 79

A buyer needs to average a 60% markup. She has purchased 54 cashmere sweaters that cost $58 each and 48 merino wool sweaters that cost $32 each. If she plans to retail the cashmere sweaters for $139 each, what must be the average retail price for each of the merino wool sweaters in order to maintain the planned markup percent?

Question 80

What should be the initial markup percent in a department having these planned figures?