Business Math - markup help? I'm so lost!

Question

The 7th Inning is buying Ohio State T-shirts. The cost of the shirts, which includes permission fees paid to Ohio State, will be $10.90 each if 1,000 shirts are purchased. Charlie sells 800 shirts before the football season begins at 50% markup based on cost. What is the gross margin (markup) if Charlie sells the remaining 200 shirts at a 25% reduction from the selling price?

Answer 1

The selling price of a T-shirt before the football season begins.

P₁ = (10.9) (1 + 0.5) = $16.35

The discounted price of a T-shirt at a 25% reduction from the selling price

P₂ = 16.35 (1 - 0.25) = $12.26

 

The net sales

= 800(16.35) + 200(12.26)

= $15532

 

The gross margin

= net sales - cost

= 15532 - 1000(10.9)

= $4632

 

Note

If the question asked for gross margin ratio, the answer would be

Gross Margin Ratio = Gross Margin/Net sales

                            = 4632/15532

                            = 0.298 or 29.8%