The buyer for Christmas items for a large department store is trying to determine prices for this years merchandise. Her manager indicated that the maintained gross margin for these items should be 50 percent of total sales. Last year, markdown reductions amounted to 25 percent of last years total dollar sales of Christmas items.

(a) Given that the buyer can assume that this years markdown percentage will be similar to last years, what is the initial gross margin that she should use?

(b) Given your answer to Part (a), if a lighted Santa Claus lawn ornament costs the retailer $29.60, what should be its initial retail price?

(c) Briefly explain what price segmentation is. When retail markdowns are used as a means of price segmentation, which of the six price-segmentation fences described in the course is being used? Explain your answer.