CHAPTER $6$ MARKUP AND MARKDOWN Case in Point Summary Exercise

RECREATIONAL EQUIPMENT INC. $($REI$)$ www$.$REI.com Facts: $1938$: Established by $23$ mountaineers $2001$: Exceeded $2$ million members $2005$: Annual sales passed $$1$ billion $2018$: About $$200$ million returned to members Three$-$quarters of profit shared with outdoor community

REI is a cooperative that focuses on the great outdoors. Although anyone can shop at REI, the firm is owned by the members who pay a one$-$time fee of $$20$ and receive annual dividends based on company profit and the amount of each member$$s annual purchases. A marketing manager was interested in a new line of off$-$piste skis for skiing over rugged terrain and jumping off cliffs. The manager works with James Smelter in inventory to place the following orders for two different skis.

$1$st order $2$nd order

Model Name Number $15$ pairs

$22$ pairs Steep Alpine Cliff Hoppers $1.$ Find the cost per pair of skis for both models. $1.2.$ If the markup on cost for each pair of skis is $38\%,$ find the list price for each. $2.$

$3.$ The skis were received on January $1,$ and a physical inventory at the end of January showed that $7$ pairs of Steep Alpine and $14$ pairs of Cliff Hoppers remained. Find the average inventory at cost$.$

$3.$

Total Cost $$4395$ $$7194$

$4.$ Use the data for these skis to find the turnover at cost for the month of January. $4.$

$5.$ The managers are not happy with the quality of the skis and sell the remaining skis at a markdown of $40\%.$ Find the price per pair of skis after being marked down.

$6.$ Assume that operating expenses at REI are $22\%$ of cost and determine the amount of any profit on these skis. If there was no profit, find the amount of the operating loss and$/$or the absolute loss.

$5.6.$

Discussion Question: Do you think firms often lose money on new products? What do you think would happen to a company that often loses money on new products? Explain. Source: RECREATIONAL EQUIPMENT INC. $($REI$),$ www$.$REI.com.