SUB : BUSINESS MATHMATICS

CASE STUDY

Question 2:

Solve problems related to discounts, profit and competitive selling price through the markup and markdown.

1.Most of businesses buy their merchandise from wholesaler and resell. Since you don't make your video games you sell, then you need to buy it. To make a profit you must sell the video games at a higher price than the original price at which you purchased it. The amount which you increased the price to cover the cost is known as markup. For example, if you buy a video game for $30 you must sell it at more than $30 to make a profit.

a)Assume that you purchase a Nintendo 64 for $45 and plan to resell it for $63. What would the markup rate on this console be?

b)In your opinion, explain how markup rates effect the sale price of product?

(20 marks)

2.As we known, a strategy that many businesses use to increase sale is to offer markdown. A markdown can occur to bring in business, because a product is no longer be sold at its current price. Markdown is an amount by which you decrease the selling price. The amount that you decrease the price by can be expressed as a percent as a percent of the selling price and known as a markdown rate.

a)Assume that you are selling a video game that you initially bought for $30. You decide to reduce the selling price to $21 in hopes to increases the likelihood of having someone to buy it from you. What is the markdown rate on the video game?

b)In your opinion, explain how markdown rates effect the sale price of product?

(20 marks)

3.From the finding above, in (1b) and (2b) explain the changes in original selling (from the manufacture) through the markup and markdown. Justify your answer with facts and example.

(15 marks)