The buyer for Christmas items for a large department store is trying to determine prices for this year’s merchandise. Her manager indicated that the maintained gross margin for these items should be 45 percent of total sales. Last year, markdown reductions amounted to 25 percent of last year’s total dollar sales of Christmas items.Given that the buyer can assume that this year’s markdown percentage will be similar to last year’s, what is the initial gross margin that she should use? Given your answer to Part (a), if a lighted Santa Claus lawn ornament costs the retailer $25.30, what should be its initial retail price?Briefly explain what price segmentation is. When retail markdowns are used as a means of price segmentation, which of the six price-segmentation fences described in the course is being used? Explain your answer.

Price Segmentation:The strategy of setting different prices for the same product based on various…

Answered: The buyer for Christmas items for a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The buyer for Christmas items for a large department store is trying to determine prices for this year’s merchandise. Her manager indicated that the maintained gross margin for these items should be 45 percent of total sales. Last year, markdown reductions amounted to 25 percent of last year’s total dollar sales of Christmas items.

Given that the buyer can assume that this year’s markdown percentage will be similar to last year’s, what is the initial gross margin that she should use?
Given your answer to Part (a), if a lighted Santa Claus lawn ornament costs the retailer $25.30, what should be its initial retail price?
Briefly explain what price segmentation is. When retail markdowns are used as a means of price segmentation, which of the six price-segmentation fences described in the course is being used? Explain your answer.

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