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Chapter 5 | Mathematics of Merchandising
5
MATHEMATICS OF
MERCHANDISING
Have you ever wondered why prices of items sold at wholesalers like
‘Costco’ and ‘Wal-Mart’ are cheaper than prices of the same items sold
at a convenience store; why prices of items are cheaper online than at
retail outlets; or how a ‘Dollar Store’ manages to sell items for a very
cheap price? Large distributors buy directly from manufacturers to
reduce the cost of the product offered to consumers. Online stores
have less overhead expenses, employee time, storage costs, etc.,
which enable them to pass on the savings to customers. Although
stores like the ‘Dollar Store’ make small profits on each item sold, they
make high overall profits by selling large quantities of items. Pricing
responsibilities such as these, and many more, lie in the hands of a
seasoned merchandiser. This chapter will provide you with the basic
analytical skills and terminology used in retail management that a
merchandiser should possess to make intelligent business decisions.
learning objectives
■ Solve problems involving a single trade discount rate and series of trade discount rates,
and calculate the equivalent trade discount rate for a series of trade discount rates.
■ Solve problems involving cash discounts for full and partial payments.
■ Calculate the amount of markup and rate of markup on cost and selling price of items.
■ Calculate the amount of markdown and rate of markdown on selling price of items.
■ Perform calculations involving markup and markdown in calculating profit or loss.
■ Calculate the effective markup and effective rate of markup.
chapter outline
5.1Introduction
5.2 Trade Discounts
5.3 Payment Terms and Cash Discounts
5.4 Markup
5.5 Markdown
5.6 Applications of Markup and Markdown
5.7 Effective Markup