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Ron Arjay Lobhoy Bscpe - Iv

This document discusses pricing policies and markups for retailers. It notes that the average markup of 40% does not mean every item is marked up by that amount. Some items will be above average and some below, but the overall average must be maintained to reach the planned profit. Losses from below average markups must be offset by above average items. The document also explains how operating expenses, costs, and desired profits must all be accounted for in determining the initial sales price through markups.

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Xandra Lee
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58 views9 pages

Ron Arjay Lobhoy Bscpe - Iv

This document discusses pricing policies and markups for retailers. It notes that the average markup of 40% does not mean every item is marked up by that amount. Some items will be above average and some below, but the overall average must be maintained to reach the planned profit. Losses from below average markups must be offset by above average items. The document also explains how operating expenses, costs, and desired profits must all be accounted for in determining the initial sales price through markups.

Uploaded by

Xandra Lee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 9

Ron Arjay Lobhoy

BSCpE IV
1. Trade Laws
2. Nationally advertised price
3. Desired customer clientele
4. Competitor price policies
5. Market strategies
6. Manufacturers suggested prices
7. Type of merchandise handled
8. Seasonal nature of sales
9. Demand factor of certain products
10. Price lining

Average on total sales does not mean that every item in the
store was marked-up 40% of sales. Some had more than the
average and some had less than the average

The overall average must be maintained to arrive at the
planned profit

Loss leaders and sales in the less-than-average area must be
offset

Pricing Policy
90% or more Sales at more-than average mark-up
40% Average mark-up sales
Cost Sales at less-than average mark-up
Sales at less than cost (loss leaders)

Saturday specials, other sale prices, and special attractions
will alter the prices of the same product from time to time
to attract customers, who are price-conscious

The idea of attracting sales by using less-than average
mark-up items is practiced by retailers in almost every line
of consumer goods.

Mark-up represents the difference between what is paid for the
merchandise and the price at which it is sold to the customer

Mark-up should always be computed as a percentage of the retail price

The most competent owner-entrepreneur would compare his sales
records from period to period in terms of the percentage of sales and
average mark-up represented for each department or type of
merchandise

Operating expenses + Cost of goods + Profits = 100%

Mark-up was 25% while operating expenses were 23% including his
salary, he must have a net return on investment of 2% of sales. A
mark-up of 25% of cost is equal to 20% on sales. The firm incurred a
net loss from operations of 3% of sales

Merchandise costing P100
Mark-up was 25% of cost; the sales price would be P125 (25% + 100%)
Operating expenses are 23% of sales, P28.75 (23% x P125)
Net result is a loss of P3.75 on each P125 of sales or P100 of cost of
merchandise
Mark-up of P25 is P3.75 less than operating expenses of P28.75
The owner-entrepreneur had to increase his mark-up or reduce
operating expenses to get back into a profit position
The mark-up must cover all these items:
Operating expenses
Shortages
Damaged merchandise
Markdowns
Employee discounts
Profits

Operating expenses and desired profits are clearly set forth on the
budgeted income statement

It is always hoped to keep markdowns, shortages and damaged
merchandise to a minimum.

Initial price in pesos must equal cost of merchandise + operating
expenses + markdowns + shortages + damaged goods + employee
discounts + profits

Percentage of cost is necessary to provide the desired percentage of
sales price in the mark-up
Mark-up equivalents
Desired % of sales Equivalent % of cost
10 11.1
11 15
12 17.7
13 25
14 33.3
15 42.9
33 1/3 50
35 53.9
36 66.7
50 100
Ron Arjay Lobhoy
BSCpE IV

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