The buyer for Christmas items for a large department store is trying to determine prices for this year’s 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 year’s total dollar sales of Christmas items.

(a) Given that the buyer can assume that this year’s markdown percentage will be similar to last year’s, 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, what is the price segmentation fence that is being used? Explain your answer.

Answer rating: 100% (QA)

Cost of Goods sold 100 Maintained gross margin 50 Final price to be sold with 10050 150 Price after ... View the full answer