A clothing retailer knows that to break even and make a profit, he needs to have a minimum retailer margin (also referred to as a contribution margin or gross margin) of at least 55 percent. If he is to sell a pair of shorts for the manufacturer's suggested retail price of $49.99, what is the most he can pay the manufacturer for the shorts and maintain his margin?

ANSWER:

A salesperson is developing a quote for a quantity of disposable hospital gowns. His cost for each case of gowns is $72.00. His firm requires that he have a 20 percent margin so he is using a markup on selling price calculation to price the gowns. What will his quote be per case of gowns if he uses a 20 percent markup on selling price?

ANSWER:

10S-2: Executives of Studio recordings Inc. produced the latest compact disc by the Starshine Sisters Band, titled Sunshine/Moonshine. The following cost information pertains to the CD.

a. CD package $0.75/CD

b. Songwriters' royalties $0.45/CD

c. Recording artists' royalties $0.95/CD

d. Advertising and promotion $1,350,000

e. Studio recording Inc.'s overhead $280,000

f. Selling price to the CD distributor $8.70

Calculate the following:

• Contribution per CD unit
• Break-even volume in CD units and dollars
• Net profit if 1 million CDs are sold
• Necessary CD unit volume to achieve a $500,000 profit