Case 5 Questions

Merchandising Cycle of a Product: Manufacturer to Consumer

Isabelle, a college student, enjoyed this chapter on the mathematics of merchandising and wanted to see for
herself how a product moves through the merchandising cycle from a manufacturer to the consumer. During
her 2010 summer holidays, she decided to study the merchandising cycle at her fathers clothing store.
The store is located in Toronto and purchases dress shirts from a garment manufacturer in Vancouver.
During her study period the store ordered 100 dress shirts after negotiating a series of trade discounts of
10%, 8%, and 6% with the garment manufacturer. The invoice for the shipment for $2500 was dated April 28
with payment terms 4/10, 3/20, n/45. Her father settled this invoice by making payments of $500 on
May 08, $600 on May 18, and the balance on May 25. The stores operating expenses were 10% of the cost
and rate of markup was 30% on the selling price.
The store sold 45 shirts at the regular selling price. During a sale, they offered a markdown of 10% and sold
another 25 shirts. They then sold the remaining shirts at the break-even price.
Isabelle created her report and wanted to cross-check her answers. Calculate the following for her:
a) The garment manufacturers list price of each shirt and the amount of trade discount (for all 100

dress shirts) received by the store from the manufacturer.

b) The single equivalent discount rate for the given three trade discounts.
c) The cost of each shirt to the store after both trade discounts and cash discounts.
d) The regular selling price at which 45 shirts were sold.
e) The sale price at which 25 shirts were sold.
f) The break-even price at which the remaining shirts were sold.
g) The total profit or loss from the sale of 100 shirts.
h) If the payment terms were 4/10, 3/20, n/45, R.O.G. instead of the given ordinary dating terms and the
shipment arrived on May 02, calculate the answers for questions (c) to (g) above.

Answers:
a. $32.12, $712.05

b. 22.17%

c. $24.61

e. $791.00

f. $812.10

g. $478.63

h. The answers are the same as c. to g. above

d. $1582.20