A retailer has anticipated yearly expenses of $300,000,a net profit objective of $72,000,planned reductions of $24,000,and planned net sales of $1,000,000.What is its required initial markup percentage?

Question

Quizplus · Accepted Answer

The formula to calculate the required initial markup percentage is:

Required Markup Percentage = (Total Expenses + Net Profit + Planned Reductions)/Planned Net Sales

Plugging in the values given:

Required Markup Percentage = ($300,000 - $24,000 + $72,000)/$1,000,000
Required Markup Percentage = $348,000/$1,000,000
Required Markup Percentage = 34.8%

However, we need to add the markup percentage to the cost percentage to get the selling price percentage.
Let the cost percentage be C.
Then markup percentage would be (100 + C) * Required Markup Percentage.
So we get, 
C + (100+C)*0.348 = 100
Solving for C we get, 
C = 61.3

Therefore, the initial markup percentage would be 38.7%.

A Retailer Has Anticipated Yearly Expenses of $300,000,a Net Profit