Markups And Markdowns Chapter 12 1e Test Questions & Answers

Chapter 12

Markups and Markdowns: Perishables and Breakeven Analysis

True/False Questions
 

1. Gross profit is net sales minus the cost of bringing merchandise into the store. 
True    False

2. Operating expenses are the unusual expense of doing business. 
True    False

3. Gross profit plus operating expenses equals net income. 
True    False

4. Markup represents an amount needed to cover operating expenses. 
True    False

5. Selling price = cost – markup. 
True    False

6. When markups are based on cost, the selling price is 100%. 
True    False

7. The amount of markup is represented as the portion only when markups are based on cost. 
True    False

8. The selling price can be calculated if the cost and the percent markup on cost are given. 
True    False

9. Actual cost is equal to the cost times the markup percent on cost plus 1. 
True    False

10. Cost is equal to the selling price divided by (1 + markup percent on cost) when markup is based on cost. 
True    False

11. When markup is based on selling price, the cost is 100%. 
True    False

12. When markup is based on selling price, the cost is the base. 
True    False

13. Percent markup on the selling price is equal to the amount of markup divided by the selling price. 
True    False

14. If the selling price and percent markup on selling price are given, the actual cost can be calculated. 
True    False

15. Selling price times 1 minus markup percent on selling price will equal the cost if markup is based on selling price. 
True    False

16. Dollar markup divided by the selling price equals percent markup on cost. 
True    False

17. Percent markup on selling price can be converted to percent markup on cost by formula. 
True    False

18. Dollar markdowns represent price increases to the original selling price. 
True    False

19. The markdown percent is the amount of markdown divided by the new sale price. 
True    False

20. A final selling price may be the result of a series of markdowns (and possibly some markups). 
True    False

21. To place a price on perishable items, there is no need to calculate the total cost as well as total selling price of the items. 
True    False

22. Contribution margin is selling price plus unit cost. 
True    False

23. Breakeven point is fixed cost divided by contribution margin. 
True    False

Multiple Choice Questions
 

24. Net income is calculated as: 
A. Net sales + costs – operating expenses
B. Net sales – costs – operating expenses
C. Net sales + costs + operating expenses
D. Net sales – costs + operating expenses
E. None of these

25. Markup is: 
A. Selling price + cost
B. Selling price divided by cost
C. Selling price – cost
D. Selling price × (1 + cost)
E. None of these

26. When markup is based on cost: 
A. Cost is the portion
B. Markup is the rate
C. Cost is equal to selling price
D. Cost is 100%
E. None of these

27. An Apple iPod sells for $299, which is marked up 40% of the selling price. The cost of the IPod is: 
A. $197.40
B. 179.40
C. 149.70
D. 194.70
E. None of these

28. Gap sells jeans that cost $21.00 for a selling price of $29.95. The percent of markup based on cost is: 
A. 42.62%
B. 46.26%
C. 49.88%
D. 48.9%
E. None of these

29. (1 + markup percent on cost) × cost equals: 
A. Cost at wholesale
B. Cost at retail
C. Selling price
D. Markup
E. None of these

30. If percent markup on cost and selling price are known, one is able to compute the: 
A. Amount of markdown
B. Amount of spoilage
C. Cost
D. Selling price at wholesale
E. None of these

31. When markups are based on the selling price, the: 
A. Selling price is the portion
B. Selling price is 100%
C. Selling price is cost – markup
D. Selling price is 100% + cost percent
E. None of these

32. Bill's Furrier marks up mink coats $3,000. This represents a 50% markup on cost. What is the cost of the coats? 
A. $1,500
B. 6,000
C. 4,500
D. 9,000
E. None of these

33. Markdowns may be caused by: 
A. Lack of seasonal changes
B. Lack of special promotions
C. Style changes
D. Decreased competition
E. None of these

34. The markdown percent is calculated by: 
A. Amount of markdown divided by sale price
B. Amount of markdown divided by original selling price
C. Sale price divided by amount of markdown
D. Original selling price divided by amount of markdown
E. None of these

35. Setting a price on perishable items does not include: 
A. Calculating total cost
B. Calculating total selling price
C. Calculating a selling price per day
D. Calculating a selling price per pound
E. None of these

36. A computer sells for $995, which is marked up 35% of the selling price. The cost of the computer is: 
A. $1,343.25
B. 1,433.52
C. 1,350.77
D. 1,530.77
E. None of these

37. Red Jeans Inc. sells jeans that cost $16.55 for a selling price of $35.99. The percent of markup based on cost is: 
A. 17.46%
B. 94.44%
C. 4.02%
D. 7.07%
E. None of these

38. J.C. Penney sells a Timex watch for $139.99 that cost $89.97. J.C. Penney's percent of markup based on the selling price is: 
A. 35.56%
B. 35.57%
C. 35.73%
D. 37.52%
E. None of these

39. A local True Value Hardware Store marks its goods up 38% on cost. If a snow blower cost True Value $400, the selling price would be: 
A. $525.00
B. 552.00
C. 542.00
D. 452.00
E. None of these

40. Jay King, owner of a local Bed and Bath store, knows that his customers will pay at most $299 for a blow-up bed. Assuming Jay wants a 40% markup on the selling price, the most he could pay the manufacturer for the blow-up bed is: 
A. $197.04
B. $179.04
C. $104.65
D. $179.40
E. None of these

41. Ski Market sells snowboards. Ski Market knows that the most people will pay for the snowboards is $129.99. Ski Market is convinced that it needs a 45% markup based on cost. The most that Ski Market can pay to its supplier for the snowboards is: 
A. $98.65
B. $96.65
C. $88.65
D. $87.65
E. None of these

42. Zales bought a tea set for $1,400. Zales wants to mark up the set 55% of the selling price. The selling price of the tea set should be: 
A. $2,030
B. $2,300
C. $3,111.11
D. $3,111.10
E. None of these

43. At the end of the summer, Walgreens advertised blow-up pools for 66% off the regular price. Jeff Jones saw a pool with a regular price of $49.99. The dollar markdown is: 
A. $39.29
B. $32.99
C. $33.99
D. $33.39
E. None of these

44. Mr. Small, the store manager for Jay's Appliance, is having a difficult time placing a selling price on a refrigerator that cost $410. Mr. Small knows his boss would like to have a
45% markup based on cost. The selling price should be: 
A. $745.45
B. $754.54
C. $594.50
D. $549.50
E. None of these

45. Belle's Bake Shop makes croissants that cost $1.75 each. Past experience shows that 10% of the croissants will spoil and have to be discarded. Assuming Belle wants a 45% markup based on cost and produces 300 croissants, each croissant should sell for: 
A. $2.28
B. $2.54
C. $2.45
D. $2.82
E. None of these

46. A local Dunkin’ Donuts makes blueberry muffins that cost $.69 each. Past experience shows that 15% of the muffins will spoil and have to be discarded. Assuming that this shop wants a 30% markup based on cost and produces 200 muffins, each muffin should sell for: 
A. $.90
B. $.91
C. $1.50
D. $1.06
E. None of these

47. A local Dot Dress Shop is selling a suit for $99. Because of changing styles, the first markdown was 8% and second markdown was 25%. The suit still did not sell, so a final markdown of 10% was taken. The sale price is currently: 
A. $68.31
B. $86.31
C. $61.84
D. $61.48
E. None of these

48. Contribution margin is: 
A. Net sales
B. Revenues plus variable cost
C. Revenues minus variable cost
D. Revenues divided by fixed cost
E. None of these

49. Lester Co. produces toys kites. It has a fixed cost of $62,150. If the selling price per unit is $9.50 and the variable cost per unit is $6.25, the breakeven point is: 
A. $9,207
B. 6,542
C. 22,600
D. 29,860
E. None of these

50. Fathers' Day suits were advertised for 35% off the regular price. A suit regularly sells for $210. The amount of the markdown is: 
A. $37.50
B. $136.50
C. $73.50
D. $163.50
E. None of these

51. Jackie Smith, a customer of Roger Blank, will pay only $190 for a tennis racket. Assuming Roger works on a 60% markup on the selling price, the most Roger will pay the manufacturer is: 
A. $76
B. $114
C. $67
D. $141
E. None of these

52. A video game sells at Arnolds for $14.99. Arnolds marks the game up at 40% of the selling price. The cost of the video game to Arnolds is: 
A. $6.00
B. $8.99
C. $6.50
D. $9.10
E. None of these

53. Camille Keegan sells lamps for $105.55 that cost her $75.00. Camille's percent of markup based on the selling price is: 
A. 38.9%
B. 28.94%
C. 40.73%
D. 40.37%
E. None of these

54. A wooden duck with a regular selling price of $125.99 is marked down to $79.99. The percent of markdown is: 
A. 57.51%
B. 36.51%
C. 35.61%
D. 55.71%
E. None of these

55. Kohl’s sells watches that cost it $6.95 for a selling price of $39.99. What is the percent markup on cost? (Round to the nearest tenth percent.)

A. 17.4%

B. 82.6%

C. 575.9%

D. 475.4%

E. None of these

56. An Apple iPad sells for $699.00 on eBay. The markup is 30% on cost. What is the total cost of the iPad sold on eBay?

A. $537.69

B. $489.30

C. $908.70

D. $490.00

E. None of these

57. Macy’s Department Stores mark up men’s cologne 63% on cost for an 8-ounce bottle. A bottle of cologne costs Macy’s $23.00. What is the selling price for the 8-ounce bottle?

A. $31.51

B. $37.49

C. $37.47

D. $37.00

E. None of these

58. Johnny Mac’s Sporting Goods bought a baseball glove from Rawlings Sporting Goods for $66.00. They want to mark up the glove 70% on the selling price. What should Johnny’s sell the glove for?

A. $113.22

B. $179.82

C. $246.42

D. $220.00

E. None of these

59. Straub’s Bakery makes 200 Danish cakes that cost $2.70 each. Straub’s needs a 66% markup on cost and normally discards 10% of what it makes. At what price should Straub’s sell the Danish cakes?

A. $4.48

B. $4.98

C. $4.84

D. $4.89

E. None of these

Short Answer Questions
 

60. 1. Dollar markdown
2. Dollar markup
3. Cost
4. Gross profit
5. Markdowns
6. Markups
7. Net income
8. Breakeven point
9. Percent markup on cost
10. Percent markup on selling price
11. Perishables
12. Contribution margin
A. Dollar to cost
B. Dollar profit
C. Price paid to supplier
D. Goods on services with a limited life
E. Selling price is base
F. Original selling price minus current price
G. No profit, no loss
H. Difference between selling price and variable cost
I. Price reductions
J. Cost is base
K. Selling price minus cost
L. Net sales – cost of goods sold 

61. Assume markup is based on cost. Complete:
  
A. _____________
B. _____________ 

62. Assume markup is based on cost. Solve for the actual cost (round to nearest cent):
Selling price $600
Markup % on cost 35%
Actual cost? 

63. Assume markup is based on cost. If the cost of a table is $62 and it sells for $110, what is the percent of markup based on cost? Round to the nearest hundredth percent. 

64. Assume markup is based on selling price. Complete:
  
A. ______________
B. ______________ 

65. Assume markup is based on selling price. Solve for the selling price (round to nearest cent):
25% markup on selling price
Actual cost $650
Selling price? 

66. Complete (round answers to nearest cent):
  
A. _______________
B. _______________
C. _______________ 

67. Calculate the final selling price to the nearest cent (round each calculation to nearest cent as needed):
   

68. Convert a 40% markup percent on cost to markup percent on selling price. (Round to nearest hundredth percent.) 

69. Breck Hardware purchased from Black & Decker 10 Dustbusters for $24.95 each. What should Breck charge its customers for each Dustbuster if it has a 39.5% markup on cost? 

70. Sullivan's Handbags marks up its bags at 45% of the selling price. Pat Sullivan saw a bag at a trade show that she would sell to her customers for $85.00. What is the most she could pay for the bag and still retain the 45% markup of the selling price? 

71. Pete's Deli sells corned beef at $2.55 per pound. It pays its wholesaler $1.95 per pound. What is the markup rate based on A) cost and B) selling price? (Round to nearest tenth percent.) 

72. In downtown Boston, a bakery produces 200 bagels a day at a cost of $.20 each. It is expected that 15% of the bagels will spoil before being sold. Assuming the bakery expects to make a 40% markup on its cost, what should the selling price of each bagel be? 

73. Bill Angel marks up his goods 38% on cost. A Nikon camera cost Bill $410. What is Bill's selling price? 

74. Talbot's sells ladies’ sport coats for $99.99 that cost $65.50. What is the percent markup on cost? Round to nearest hundredth percent. Verify the cost. 

75. Tri-City sells a microwave for $550. Tri-City marks up the microwave 70% on cost. What are the cost and markup of the microwave? 

76. Bill's Hardware marks up snow blowers $130 and sells them for $485. Markup is on cost. What are the cost and percent markup to nearest hundredth percent? 

77. Munroe Corporation sells Nautilus equipment for $399.95. Munroe marks up the equipment 30% on the selling price. What did the equipment cost Munroe? Round to the nearest cent. 

78. Jingle Corporation produces toy footballs. Each football sells for $9.95 with a variable unit cost of $7.10. Assuming a fixed cost of $11,400, what is Jingle's breakeven point? 

79. Pat Maninan, a customer of Brown Co., will pay $400 for a new kitchen table. Brown has a 55% markup on the selling price. What is the most Brown can pay for this kitchen table? 

80. French Co. marks up its goods 45% on cost. What is French's equivalent markup on selling price? Round to the nearest hundredth percent. 

81. Francis's Bakeshop makes cupcakes that cost $.95 each. Francis knows that 20% of the cupcakes will spoil. Assume Francis wants a 35% markup on cost and produces 60 cupcakes. What should Francis charge for each cupcake? Round to the nearest cent. 

82.    

83.    

84. Selling price $500
Markup % on cost 40%
Actual cost? 

85. Selling price $700
Markup % on cost 30%
Actual cost? 

86. A. If the cost of a table is $59 and it sells for $100, what is the percent of markup based on cost? Round to the nearest hundredth percent. B. Check your answer. 

87. A. If the cost of a TV is $120 and it sells for $200, what is the percent of markup based on cost? Round to the nearest hundredth percent. B. Check your answer. 

88.    

89.    

90. 26% markup on selling price
Actual cost $700
Selling price? 

91. 28% markup on selling price
Actual cost $900
Selling price? 

92.    

93.    

94.    

95.    

96. Convert a 40% markup percent on cost to markup percent on selling price. (Round to the nearest hundredth percent.) 

97. Convert a 30% markup percent on cost to markup percent on selling price. (Round to the nearest hundredth percent.) 

98. A toaster is marked up $10 and sells for $45.00. Find the cost and percent markup if the markup is based on cost. (Round to the nearest hundredth percent.) 

99. Blue jeans, Inc., sells jeans that cost $15.99 for a selling price of $42.95. What is the percent of markup based on cost? (Round to the nearest hundredth percent.) 

100. Find the cost and markup of a stove if it sells for $400 and is marked up 100% of the cost. 

101. Al Shelf knows his goods are marked up 36% on cost. If a TV cost Al $280, what would the selling price be? 

102. Al's Hat Shop bought a hat for $95. Al wants to mark up the hat by 55% of the selling price. What should the selling price of the hat be? 

103. A video game sells at Arnolds for $199.95. Arnolds marks the game up at 30% of the selling price. What was the cost of the video game to Arnolds? 

104. Jane Corporation produces fudge bars. Total fixed cost is $55,500. Each package of fudge bars sells for $4.95 with a variable unit cost of $3.10. What is the breakeven point for Jane Corporation? 

105. Camille Keegan sells lamps for $92.10 that cost her $62.00. What is Camille's percent of markup based on the selling price? (Round to the nearest hundredth percent.) 

106. Evelyn Smith, a customer of Bill Blank, will pay only $125 for a tea set. Assuming Bill works on a 40% markup on the selling price, what is the most Bill could pay the manufacturer for this tea set? 

107. A wooden duck with a regular selling price of $109.45 is marked down to $69.50. What is the percent of markdown based on the regular price? (Round to the nearest tenth percent.) 

108. May's Bakeshop makes triple chocolate brownies that cost $1.50 each. Past experience shows that 20% of the brownies will spoil. Assuming May wants a 40% markup based on cost and produces 200 brownies, what should each brownie sell for? 

109.  Convert a 36% markup on selling price to the equivalent percent markup on cost.

110. Ace Hardware purchased 15 shovels from Skill Company for $7.00 each. Ace’s markup is 33% on selling price. What should Ace charge for the shovels? (Round to hundredths.)

111. Lonnie Ianazzo, owner of Anthony’s Jewelers in Tulsa, Oklahoma, marks up diamond earrings 83% on cost. The earrings cost Anthony’s Jewelers $120 each. At what price should Anthony’s sell the earrings?

112. Best Buy sells Kindle E-readers for $79.99 that cost the store $16.09. What is the percent markup on cost?

113. Hannecke Hardware sells a wheelbarrow for $69.99. Hannecke marks up the wheelbarrow 40% on the selling price. What did the wheelbarrow cost Hannecke?