2. Luke Stevens General Store pays a wholesaler $30.00 for an item and then sells it with a

25 percent markup. The retailers selling price is:

$37.50.

$40.00.

$48.50.

$55.00.

None of the above.

3. Later Luke Stevens General Store paid $120.00 for another item. If Luke plans a 40 percent markup on this item, what is the retail selling price?

A. $140.40.

B. $160.00.

C. $168.00.

D. $180.40.

E. $200.00.

4. The Horizons Cycle Shop bought 3 motorcycles for $2100 total, and sold each one for $1000. The markup percent was

A. 33 1/3.

B. 30.

C. 142.

D. 50.

E. 70.

5. Lukes Manufacturing Co. has a production cost of $280. It sells its product to a wholesaler for $400. The wholesaler then sells the item to retailers for $500 and the retailers sell the item for $1,000. Which of the following is true about this "markup chain?"

The retailers' markup is 100 percent.

The wholesaler's markup is 25 percent.

The manufacturer is taking a markup of 30 percent.

All of the above are true.

None of the above is true.

6. The Quilting Craft Company manufactures quilts for sale in specialty shops. Quilting Craft sells direct to retailers who apply a 50 percent markup. If Quilting Craft spends $30 making each quilt, what markup percent can Quilting Craft apply to ensure the final selling price is $150.00.

A. 33.3 percent.

B. 50 percent.

C. 60 percent.

D. 66.7 percent.

E. 250 percent.

7. Wilson sells a basketball to a wholesaler for $16, and the wholesaler applies a 20 percent markup. A retailer then applies a 33 percent markup. The final selling price is:

$24.96.

$25.54.

$26.00.

$29.85.

$30.00.

8. Brayden makes a rugged watch for $32 and sells it with a 50 percent markup to a wholesaler. The wholesaler then applies a 20 percent markup. A retailer then uses a 60 percent markup. The final retail selling price for the rugged watch is:

$64.00.

$73.60.

$80.00.

$92.16.

$200.00.

9. Bostons Apparel sells a certain brand of denim jackets for $100. Boston's Apparel buys its jackets from a wholesaler for $60. The wholesaler purchases from a manufacturer and applies a 40% markup. The manufacturer applies a 20% markup. Calculate:

The retailer's markup %_____________

The wholesaler's markup $_________________

The wholesaler's cost $_________________

The manufacturer's markup $__________________

The manufacturer's cost $________________

10. Noah purchases a smart phone for $1000. The retailer stated that a 60% markup had been used at retail. The wholesaler used a 40% markup. The retailer believed that the manufacturer had used a 30% markup. If the retailer's assumptions are correct, what are the following values?:

The retailer's markup $______________________

The retailer's cost $_____________________

The wholesaler's markup $______________________

The wholesaler's cost $___________________

The manufacturer's markup $______________

The manufacturer's cost $_______________

11. Leo Productions manufactures unique croquet sets at a cost of $45. Leo applies a 25% markup. The wholesaler applies a 60% markup. The retailer easily sells these desirable sets for $300. Calculate the following:

The retailer markup %__________________

The retailer cost $__________________

The wholesaler cost $____________________

The producer's selling price $__________________

The retailer's markup $___________________

The wholesaler's markup $_________________

12. Luka, Inc., sells marketing textbooks to a wholesaler for $100 including a 30% markup. The wholesaler used a 20% markup, as did the retailer. Calculate the following:

The producer's cost $________________

The wholesaler's markup $_________________

The wholesaler's selling price $___________________

The retailer's markup $_____________________

The retailer's selling price $_______________

13. Amelia Stroller has introduced a new line of baby shoes to appeal to discerning parents. She has conducted marketing research to help her identify price points for her top of the line shoe, the Baby Walker and believes her target market is willing to pay $125 for a pair of Baby Walkers, even though their children will outgrow these shoes in a matter of weeks or months. Amelias pricing concern is that while she issues an MSRP of $125, she needs to determine how much she can charge her wholesalers so that after wholesalers and retailers apply their markups, the shoes will fit in comfortably at $125. It costs Amelia $20 to make the shoes. She believes the retailers use a 60% markup, and the wholesalers use a 30% markup. What is the highest price Amelia can charge her wholesaler and still be assured the shoe will retail at $125?

A. Amelia can charge any price she wants to charge & just tell the retailers they MUST charge $125.

B. $26

C. $32

D. $35

E. Amelia cannot sell the shoes because she would have to charge less than the $20 cost

14. Mercer Industries, Inc., makes kaleidoscopes for families with young children. Mercer Industries, Inc., has worked hard to keep cost down while producing durable, high quality kaleidoscopes. Mercers newest model has an exterior made of strong plastics with designs indicative of what the viewer may experience when gazing into the kaleidoscope. Mercer Industries has been able to reduce the cost to $5.00 per unit, and plans to sell it to the wholesaler for $6.00 per unit. Mercer Industries wholesaler will include a 20% markup. The retailer will apply a 25% markup. What is the retail price the final consumer will pay?

A. $8.00

B. $9.00

C. $10.00

D. $11.00

E. Cannot be determined with the data provided.

15. Sofia shopped for toys for her young daughter. She discovered a new brand that her daughter thoroughly enjoyed. City Avenue Toys produces toy animals that represent various cat breeds. The toy cats sell for $40 at retail. Sofia knows the small manufacturer sells to a specialty wholesaler who in turn sells to gift shops. If the markup used by the gift shops is 40% and the wholesaler markup is 20%, what did the wholesaler pay to City Avenue Toys for each cat?

A. $16.00

B. $16.40

C. $19.20

D. $24.20

E. $25.60

16. Belle is an entrepreneur who recognized the need created by the abundance of technological devices for an interesting method of storing the devices. Belles Bookstorage offers custom storage devices to match the dcor of any home or office. Design costs tend to run $500. In addition, Belle will incur costs associated with materials and construction. On average, Belle charges $3000 for storage solutions. If the average cost of parts and labor is $1900, what is the average markup that Belle enjoys?

A. 36.7%

B. 20.0%

C. 16.7%

D. 10.0%

CASH DISCOUNT (You may assume there are 360 days in a year for simplicity.) See P. 433.

Effective Discount = listed %*(360/(net days-discount days))

1. Faith has received a bill with the following cash discount terms: 3/10, net 60. What is the effective discount she will realize if she pays the bill in 10 days?

7.2%

$2

21.6%

36.6%

$20

TARGET RETURN PRICING

Target Return Formula: TR (units) = TFC + (Target Return % * Investment)

P - VC per unit

= TFC + (Target Return Requirement)

FCC

TR ($) = TR (units) * P

This is similar to break even, but the target return $ must be calculated and added to the Fixed Costs to make the calculations.

1. Ember Manufacturing Company (EMC) uses target return pricing and expects to sell 40,000 units of its product in the coming year.EMCs fixed costs will be $500,000 and its variable costs will be about $20 per unit.If EMC seeks to earn a 10 percent return on its investment of $1,000,000, what price should it charge?

$21.00

$22.50

$20.00

$35.00

$32.50

2. You manage a multinational firm that has newly acquired King Kustoms.You have imposed a target return requirement of 25% on all existing divisions, and a 30% target return on all newly formed and newly acquired divisions.In analyzing newly acquired King Kustoms, you have identified $2,000,000 in investment and Fixed costs on $500,000.Variable cost per unit is $10.Sales records support the expectation that 10,000 units can be sold.With that level of sales, what price must be charged to achieve the required return on investment?

A. $50

B. $60

C. $100

D. $110

E. $120

3. Golf Links, LTD. requires its business units to earn a 20% return on investment, or the unit risks being sold.You have been newly appointed to its apparel division, and want to make sure the division is on target to make its ROI objective, so you request an assessment of the how many units your division must sell in the next year in order to achieve the Target Return requirement.Your staff advises that your units investment is $2,000,000.Your total fixed costs are $600,000.The average price you charge to the wholesaler for the apparel you produce is $50.In studying the variable costs for producing your products, it is estimated that you spend approximately $10 per unit.How many units must your division sell to achieve its target return?

65,000

50,000

25,000

15,000

10,000

4. Vanguard Corp. uses target return pricing and is hoping to earn a 20 percent return on its investment of $1 million during the coming year. Vanguard sold 30,000 units last year and hopes the same quantity will be sold this year. If Vanguard has fixed costs of $250,000 and variable costs of $10 per unit, what price should the firm set to achieve its target return? A. $58.30 B. $60.00 C. $20.00 D. $30.00 E. $25.00

5. Ultimate Manufacturing Company uses target return pricing and expects to sell 150,000 units of its product in the coming year. Its fixed costs will be $500,000 and its variable costs will be about $10 per unit. If Ultimate seeks to earn a 25 percent return on its investment of $1,000,000, what price should it charge?

A) $15.00

B) $13.33

C) $25.00

D) $5.00

E) $20.00

6. Landen Industries manufactures specialized capes for children. Landen Industries designs include syndicated characters such as Batman and Superman. To receive the rights to use images of those characters, Landen Industries must earn at least a 25% return on investment. Landens fixed costs care $800,000. The company poured $2,000,000 into equipment for the production line. The variable cost per unit is $16. If Landen Industries charges $50 per cape, how many capes (to the nearest whole number) must it sell to achieve the target return break even point?

7,3523

23,529

29,411

26,000

38,236

BREAKEVEN CALCULATIONS

Breakeven is a special case of Target Return where the Target Return Percent is assumed to be 0.

Breakeven Formula: BEP (units) = _ TFC = _ TFC_____

FCC per unit P - VC per unit

BEP ($) = BE (units) * P

You are considering opening a fast-food store.Your fixed costs for the required land, building, parking lot paving, kitchen equipment, and neon sign will be $1,000,000.The variable cost will be $1.89 for servings, which will sell for $3.89.How many servings must you sell to break even?

3,890,000

1,890,000

500,000

1,000,000

Cannot be determined from the data given.

Savannah Grace is an avid reader who is considering opening a used bookstore.She plans to purchase a store on Cherokee Street and has found a bargain location.Her fixed costs will only be $150,000.She has determined that her variable cost for securing the books for her shelves is approximately $2.50 per book.Although her competition sells books on average for $5.00 each,Savannah Grace believes she will be able to break into the market more easily if she charges an average of $4.50 per book during the first year.Please determine her Fixed Cost Contribution per Unit and her Break-even Point in DOLLARS:

$4.50; $75,000

$2.50; $187,500

$2.50; $100,000

$2.00; $150,000

$2.00; $337,500

Trevor is considering opening a new retail service operation.He has conducted an assessment of costs and tested pricing.He estimates total fixed costs at $240,000.He believes his variable cost per unit will be about $2.If he sets his price at $50 per unit of service, his fixed cost contribution per unit will be _________ and he will have to sell ___________ units to break even.

$24; 1,000

$48; 5,000

$24; 10,000

$48; 20,000

Cannot be determined with this information.

Homecare, Inc. offers home cleaning services to residential customers.Homecare, Inc., has fixed overhead expenses associated with managing the firm and promoting its services of$75,000 annually.The employees spend an average of 4 person hours per household, and use about $10.00 of cleaning products for each cleaning.Employees earn $25.00 per hour, including all benefits.The average price charged per household is $150.Approximately how many house cleanings must be done each year in order to breakeven?

1250

1500

1665

1875

2000