Because of markdowns, discounts to employees and customers, and merchandise reductions,
A) the actual selling price is lower than the initial sales price.
B) the maintained markup is always less than the gross margin.
C) the total revenue becomes equal to the total cost.
D) the value of average inventory at cost is less than its receipt value.
E) the initial markup is always lower than the maintained markup.

Question

Quizplus · Accepted Answer

Retailers rarely sell all items at the initial price. They frequently reduce the price of items for special promotions or to get rid of excess inventory at the end of a season. In addition, discounts are given to employees, and some merchandise is lost to theft and accounting errors (inventory shrinkage). These factors that reduce the actual selling price from the initial sales price are called reductions. Thus, there is a difference between the initial markup and the maintained markup.

Because of Markdowns, Discounts to Employees and Customers, and Merchandise