Generally Accepted Accounting Principles and Profit Margin Percentage

Place your name and the date at the top of the page, and answer the following questions making sure you SHOW YOUR WORK. 1. A hardware store bought a gross (12 dozen) of hammers, feeing $602. 40 for the total order. The retailer estimated operating expenses for this product to be 35% of sales, and valued a net profit of 5% of sales. The retailer expected no markdowns. What retail selling price should be set for each hammer? Hint The manner to handle this problem is to say that the Gross Profit Margin has to c everywhere the 35% of expenses applicable to the product plus the 5% of net profit wanted.And formerly you know the GPM%, you know the Cost percentage of the Selling Price. 2. Competition in a line of sporting goods limits the selling price on a accredited item to $25. If the store owner feels a margin of 35% is needed to cover expenses and return a reasonable profit, what is the most the owner can pay for this item? Hint Remember, if you know the margin percentage, then y ou know the make up percentage. 3. A retailer with annual net sales of $2 million maintains a markup of 66. 67% based on cost.Operating expenses average 35%. What are the retailers gross margin and net profit in dollars? Hint A Markup on Cost is homogeneous to what Gross Profit Margin percentage? 4. The cost to a manufacturer of flat panel displays for producing its newly designed TV Display 1000 is $250. 00. The cost for Research and Development of their new product being sold to OEMs as a component product has been one million dollars. The sales and promotional budget is $600,000, and all other fixed costs amount to $200,000.The Marketing Director and his staff have estimated demand for the new display to be between 50,000 and 75,000 units over the next year. They also have decided to price the new Display 1000 at $450 to their OEM customers. (a) How many Display 1000s does the manufacturer have to sell in order to breakeven? (b) What is the manufacturers unit contribution to profit in percentage? (c) What is the manufacturers markup on cost in percentage?