Markup vs. Margin
You buy a hat for $20 and sell it for $40. What is the markup percentage?
You average $5,000 in inventory and sell $15,000 annually. What’s your inventory turn?
What is 3 turns?
You received 50 pairs of socks and sold 25. What is the sell-through rate?
What is 50%?
You sell a $100 product for 20% off. What’s the new price?
$80
You buy a product for $40 and sell it for $80. What’s the gross margin percentage?
What is 50%?
If your inventory turn is 4 and you average $10,000 in stock, how much do you sell per year?
You sold 90 out of 120 units. What is your sell-through?
What is 75%?
What’s the difference between margin and markup?
Margin = % of retail, Markup = % of cost
Markup = How much you increase your cost to arrive at the retail price.
Markdown = The percentage of the retail price that is the profit.
If your goal is a 65% margin on a $28 cost item, what should the retail price be?
What is $80?
100% or 1.0 - 65% or .65 = .35
28/.35 = 80
Your cost is $82.50 and your margin goal is 45%. What’s the target retail price?
What is $150?
You sell $24,000 annually. To hit a 6 turn rate, what should your average inventory be?
What is $4,000?
You currently have 30 units left and sold 120. What was the original order? What was the sell-through?
You receive a 10% off invoice and free freight. How does this affect your margin?
It increases margin because your cost is lower.
You discount an item by 30%. What must your original margin have been to still make 20% profit?
Original margin must be 50% or higher
An item is marked at $90 and you want a 60% margin. What’s the highest cost you can pay?
What is $36?
40% or 0.4x 90 = $36
A category has an inventory turn of 1.0. What does this suggest about the sales and inventory?
What is overstocked and underperforming?
You want a 70% sell-through in 8 weeks. You received 200 units. How many should you have sold by week 4?
What is 70 units by week 4?
70% or 0.7 x 200 = 140/2 = 70 Units
You sell 3 items: $50 at 40%, $30 at 30%, and $20 at 50% margin. What is your weighted average margin?
Total GM $ = $20 + $9 + $10 = $39; Total sales = $100 - Margin = 39%
You sell 100 units at $25 with a 40% margin, and then markdown the remaining 50 to $15. What’s your blended margin?
Total GM$ = (100×$10) + (50×($15–cost)); assumes cost = $15 - margin = 20% blended
You bought an item for $42 and sold it for $70 after a 10% discount. What’s your actual margin?
What is 33.33%?
$70 - 10% = $63;
Margin = (63 - 42)/63 = 33.33%
Your inventory was $14,000 at the beginning of the year and $10,000 at the end. You sold $36,000 worth of product during the year. What was your inventory turn rate?
What is 3 turns?
Avg Inventory = ($14,000 + $10,000)/2 = $12,00
Turn = $36,000 / $12,000 = 3.00
You sold 72 units, have 18 left, and returned 10 defective. What’s your adjusted sell-through?
What is 72%?
72 / (72 + 18 + 10) = 72%
You receive a $1,000 credit on $10,000 in purchases. How do you reflect this in margin?
Subtract the rebate from cost - Cost = $9,000 - Margin % increases.
You want to make $2,000 gross margin from a promo. Your item cost is $12, retail is $20. How many units must you sell?
GM per unit = $8 ; $2,000 / $8 = 250 units