1. Construct an operating statement (from Gross Sales to Net Sales to Net Profit) from the following data and compute the gross margin percentage.[Remember, Net Sales typically represents 100% on the Income Statement and every line item on the statement is a percentage of Net Sales.These operating ratios are important analytical tools for measuring operating performance.]

Purchases at billed cost$15,000

Net sales30,000

Sales returns and allowances200

Cash discounts given300

Cash discounts earned100

Rent1,500

Salaries6,000

Opening inventory at cost10,000

Advertising600

Other expenses2,000

Closing inventory at cost7,500

Note: Remember, Gross Profit = Net Sales - Cost of Goods

2. Make a retail operating statement from the following information and compute the markdown percentage:

Rent$ 9,000

Closing inventory at cost28,000

Sales returns6,500

Cash discounts allowed2,000

Salaries34,000

Markdowns4,000

Other operating expenses15,000

Opening inventory at cost35,000

Gross sales232,500

Advertising5,500

Freight in3,500

Gross margin as percentage of sales35%

Note: The markdown percentage is not on the operating statement.It is simply the percentage of the resulting Net Sales that have been allowed to customers.Therefore, the following is applicable:Dollar Markdown = x% of Net Sales, which means the following: Markdown percentage = $ Markdown Net Sales

Obviously, one has to determine Net Sales from the information above to prepare the operating statement and to solve for markdown percentage.

3. What are the percentage markups on cost that correspond to the following percentages of markup on selling price (GPM)?

a.20%

b.37-1/2%[37.5]

c.50%

d.66^-2/3%[66.666]

The questions below relate to the following scenario:

Jersey Manufacturing uses a distribution channel that includes wholesalers to retailers to ultimate consumer.The Jerome Widget 1000 is priced to wholesale at $250.00.Jersey earns a 30% margin on each Widget 1000 unit.Jersey's wholesalers markup each unit $75.00.Retailers typically charge $700.00 to customers during peak season for a Widget 1000, but the unit can be priced by retailers as low as $650.00 off season.

Show your calculations for the following questions:

4. What is Jersey's unit contribution to profit (assuming there are no other costs to be added on to the margin)?

5. What does it cost Jersey to manufacture each unit?

6. What is Jersey's Markup on Cost percentage?

7.How much profit margin percentage (GPM%) do Jersey's wholesalers earn and what is their markup on cost percentage?

8. What is the typical GPM% for Retailers in peak season and what is the corresponding markup on cost percentage?

9. What is the GPM% for Retailers who charge the lowest stated price in off-season and what is the corresponding markup on cost percentage?