You operate a local business with two other partners. Your role is to work out net & list prices based on trade discounts; as well as work with markups to determine the true selling price of your inventory.

1. Suppose you obtain Inventory Item A from a local wholesaler at a net price of $170 per item. If the suggested list price from the wholesaler is $200, determine the trade discount you received from the wholesaler.

2. You get Inventory Item B from the same wholesaler at the same net price per item as Inventory Item A. You made note that the trade discount you received on Inventory Item B was 15%. What was the suggested list price?

3. For inventory Item B, you and your partners want to markup 20% of the cost per item to account for your overhead expenses and 30% of the overhead expenses for profit. What should be the selling price of Inventory Item B?

PART II You operate a local business with two other partners. Your role is to work out the rate of markup and gross profit margin; as well as work with markdowns and taxes on your inventory.

1. Using your partner’s data from Part I, determine the rate of markup and the gross profit margin of Inventory Item B. If the gross profit margin on Inventory Item A is 9%, determine the rate of markup on Inventory Item A.

2. Taking the net price as the per unit cost, suppose Inventory Item A goes on sale for 7% less than the cost price. Determine the sale price of Inventory Item A. Also, 150 units of Inventory Item A are sold at the sale price. On each inventory item you must pay 5% GST to Revenue Canada. How much in total do you owe CRA?

PART III You operate a local business with two other partners. Your role is to work with variable & fixed costs, as well as revenue to determine the total profit your inventory can produce. Your analysis also includes break-even points and determining when the firm should be in shut-down.

1. If the fixed costs related to Inventory Item B are $4500, determine a formula for the total cost of Inventory Item B (you may take the net price as the per unit cost). Using the selling price your partner found in Part I as the per unit revenue p, determine the total revenue function for Inventory Item B. What is your total revenue for selling 100 units of Item B? What are the total costs with selling 100 units of Item B?

2. Determine the total profit function for Inventory Item B. When would your business be in shut-down with regards to Inventory Item B?

3. Roughly how many units of Inventory Item B have to be sold in order to break even? Roughly how many have to be sold to realize a profit of $10,000

Answer rating: 100% (QA)

PART I 1The trade discount received on Inventory Item A can be calculated as follows Trade discount List price Net price Trade discount 200 170 Trade discount 30 Therefore the trade discount received ... View the full answer