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FBMT 202 Assignment #1 Case: Pricing and Promotions

On the September 30th a key vendor has offered the Sweater buyer a group of sweaters at a special promotional cost. The vendor has 6,750 units of assorted sweaters available that he can sell to the buyer for a reduced unit cost of $30.00, the regular unit cost of the sweaters was $52.00. The regular suggested retail price of these sweaters is $105.00. In order to secure the reduced cost price, the buyer has to buy the entire 6,750 units availability.

The vendor has available the following color assortment:

• Black: 4,500 units

• Blue: 1,000 units

• Red: 1,250 units

The vendor can ship this assortment and it will be in store in 2 weeks, ready to start selling on Oct 15th). The Buyer never bought these exact sweaters before but has other sweaters that have been on the floor selling for the past 5 weeks in the same colour assortment. Here is a recap of what was received and what was sold in the 5-week time period:

As these are wool sweaters, the buyer set an outdate for Jan 13^th (approx.15 weeks from Sept 30th ).

Prior to hearing about this new purchasing opportunity, the buyer had already planned to run a promotion in the sweaters department for Pre-Christmas. The plan was to promote the sweaters at a 30% off for the two weeks leading up to just before Christmas, (the week ending Dec 16th and the week ending Dec 23rd). Thereafter, for the remaining 3 weeks until Jan 13th, the buyer was to decide whether to further reduce the sweaters - to select whatever price the buyer felt she would need in order to be sure to be sold out by Jan 13^th. The buyer’s target-maintained markup percent for the entire season (Week ending Sept 2^nd - Week ending Jan 13th, 20 weeks) is 45.0%. The buyer’s supervisor has made it very clear that while she can pick her price after Christmas, the buyer cannot under any circumstances promote the sweaters at any greater discount than 30% leading up to Christmas.

Below is a calendar for the season:

WK 1 Week ending Sept 2

WK 2 Week ending Sept 9

WK 3 Week ending Sept 16

WK 4 Week ending Sept 23

WK 5 Week ending Sept 30 (We are here)

WK 6 Week ending Oct 7

WK 7 Week ending Oct 14

WK 8 Week ending Oct 21

WK 9 Week ending Oct 28

WK 10 Week ending Nov 4

WK 11 Week ending Nov 11

WK 12 Week ending Nov 18

WK 13 Week ending Nov 25

WK 14 Week ending Dec 2

WK 15 Week ending Dec 9 (End of Reg price selling)

WK 16 Week ending Dec 16 (2 week 30% off sale)

WK 17 Week ending Dec 23 (2 week 30% off sale)

WK 18 Week ending Dec 30 (end of season sale – possible further reductions)

WK 19 Week ending Jan 6 (end of season sale – possible further reductions)

WK 20 Week ending Jan 13 (end of season sale – possible further reductions)

The Planning department has advised that the buyer can expect sales to increase in the following manner based on the discount she selects:

10% Off: 20% increase from the original weekly selling rate

20% Off: 30% increase from the original weekly selling rate

30% Off 50% increase from the original weekly selling rate

40% Off: 100% increase from the original weekly selling rate

50% Off: 200% increase from the original weekly selling rate

60% Off 400% increase from the original weekly selling rate

70% Off 500% increase from the original weekly selling rate

FBMT 202 Assignment 2 Case: Pricing and Promotions

(Total Avail Marks 50 - You must submit your answers on the provided Answer Sheet in Excel Format.)

Use the table provided to answer questions (1) – (5). Show your work (formulas used) in the space provided in the table. Show any written answers required below the table.

1) What has been the avg weekly units sold for each colour over the past 5 weeks? (1 Mark) 

2) How many units are now available to sell in each colour for the balance of the season? (before any additional purchase is made) (1 Marks)

3) Are the sweaters selling in the same proportion that we purchased them in? Show the proportion purchased and sold as a percentage, round to 2 decimal places. (1 Mark)

4) What was the total cost of the initial purchase? (1 Mark)

5) What has been the Retail Sales $ for the first 5 weeks? (1 Mark)

6) Assuming the buyer DOES NOT buy the promotional program, and assuming the sweaters continue to sell at their historical weekly selling rate for the next 10 weeks (until the Pre-Christmas sale), using the information from the case, your answers for Questions (1) and (2) above, and the table provided, answer the following questions: Show your work (formulas used) in the space provided in the table. Show any written answers required below the table.

a. How many sweaters will we sell of each colour for the entire 10-week period (Week 6 – Week 15)? (1 Marks)

b. Will the buyer have enough goods in each colour to keep sales going until the pre-Christmas sale if she doesn’t purchase any addl goods now? If not, what would be the lost sales in units and dollars for any colour that we did not have enough goods? (2 Marks)

c. How many units/colour would be available to sell for the 5 weeks remaining in the season (Week 16 – Week 20)? (1 Mark)

d. What will be the Retail Sales Dollars for the 10 week period? (1 Mark)

7) How does the proportion of the Vendor’s assortment being offered compare with the proportional way the goods have been selling? Show your work (formulas used) in the space provided in the table. Show any written answers required below the table. (1.5 Marks)

8) Assuming the buyer DOES NOT purchase the additional units, and assuming she puts all three colours on sale at 30% off for the 2 week pre-Christmas sale (Week 16 & Week 17), using your answers to the questions above, information from the case, and the table provided, calculate the following: Show your work (formulas used) in the space provided in the table. Show any written answers required below the table.

a. What would be the expected weekly sales in each colour for each of the two-weeks of the PreChristmas Sales? (1.5 Marks)

b. What would be the new promo price for each sweater at 30% off. ( 1 Mark)

c. What would be the Total Retail Dollar Sales for the two weeks combined? (1.5 Marks)

9) Assuming the Buyer DOES NOT buy the additional assortment. Using the table provided, answer the following questions. Show your work (formulas used) in the space provided in the table. Show any written answers required below the table.

a. How many units/week will she need to sell in each of the remaining 3 weeks (the End of Season Sale, Week 18 – Week 20) in order to be completely sold out by Jan 13th ? ( 1Mark)

b. How much of a percentage increase is this in the weekly selling rate for each colour from the original rate of sale (prior to any discount)? (1 Mark)

c. What discount should she be offering for each colour for each of the three weeks in order to be completely sold out by Jan 13th ? (Note: each colour can be discounted at a different rate if you want) (1 Mark)

d. Based on your answer to (c) above, with your new selected discount, what would the new weekly unit sales be for each colour for each of the weeks in the three week End Of Season Sale? (1 Mark)

e. What would the new Total Retail Dollar sales be for the three week period? (1 Mark)

10) After considering the outcome above or not buying the additional goods, the buyer now wants to see what will happen if she DOES buy the additional goods that her vendor is offering. Assuming the buyer DOES take advantage of the promotional buy, and assuming the sweaters continue to sell at their historical weekly selling rate for the next 10 weeks (until the Pre-Christmas Sale), using the information from the case, your answers previous answers, and the table provided, answer the following questions: Show your work (formulas used) in the space provided in the table. Show any written answers required below the table.

a. How many sweaters will the buyer have available to sell in each colour after making the purchase, but before the 10-week selling period begin? (1.5 Marks)

b. How many sweaters will she sell in each colour at regular price during the 10 week period (Week 6 - Week 15)? (1.5 Marks)

c. How many sweaters will be available to sell in each colour for the 5 weeks of promotional selling (the amount left BEFORE we start the Pre-Christmas sale)? (1.5 Marks)

d. What will be the Retail Sales Dollars for the 10-week period? (1 Mark)

11) Assuming the buyer has gone ahead and purchased the additional units, and assuming she plans to run the 30% off sale for the 2 week pre-Christmas sale, sale (Week 16 & Week 17), using your answers to the questions above, information from the case, and the table provide, calculate the following: Show your work (formulas used) in the space provided in the table. Show any written answers required below the table.

a. Should she put all three colours on sale at 30% off, or should she keep any colours at regular price? (The buyer can only choose to continue selling a colour at regular price or go directly to a 30% discount - if your answer is to keep any colours at regular price, give your reason why).

b. What would be the price for each sweater during the 2 week Pre Christmas Sale. ( 1 Mark)

c. Based on the above, what would be the expected weekly sales in each colour for each of the two-weeks of the Pre-Christmas Sales? (1.5 Marks)

d. What would be the Total Retail Dollar Sales for the two weeks combined? (1.5 Marks)

12) Assuming the Buyer DOES buy the additional assortment. Using the table provided, answer the following questions: Show your work (formulas used) in the space provided in the table. Show any written answers required below the table.

a. How many units/week will she need to sell in each of the remaining 3 weeks (the End of Season Sale, Week 18 – Week 20) in order to be completely sold out by Jan 13th ? ( 1Mark)

b. How much of a percentage increase is this in the weekly selling rate for each colour from the original rate of sale (prior to any discount)? (1 Mark)

c. What discount (if any) should she be offering for each colour for each of the three weeks in order to be completely sold out by Jan 13th ? (Note: each colour can be discounted at a different rate if you want) (1 Mark)

d. Based on your answer to (c) above, with your new selected discount, what would the new weekly unit sales be for each colour for each of the weeks in the three-week End Of Season Sale? (1 Mark)

e. What would the new Total Retail Dollar sales be for the three week period? (1 Mark)

13) Even though the buyer we might not sell out to the piece, she might be better off taking a lesser discount on some or all colours for the last 3 weeks of the season. Using the table provided, answer the following questions: Show your work (formulas used) in the space provided in the table. Show any written answers required below the table.

a. Calculate the weekly unit sales at a discount 10% less than the one you selected in Q12 above. (1 Mark)

b. Based on your answer to (a) above, what would be the new Unit Selling price for the remaining three weeks for each of the three colours? (1 Mark)

c. Based on the above, calculate the new Total Retail Sales $ for the remaining three weeks. (1 Mark)

d. Compare the Total Sales calculated in (c) above with the Sales that would be made with the higher discount used in your answer for Q12. Which discount yields the higher overall sales for the three weeks period and therefore should be used. (2 Marks)

14) Based on your answers to questions (1) – (9) above, using the table provided, answer the following questions: Show your work (formulas used) in the space provided in the table. Show any written answers required below the table:

If the Buyer DOES NOT purchase any additional units:

a. What would the Total Cost Dollars of all the Purchases for the season be (the initial and the promotional)? (1 Mark)

b. What would the Total Retail Sales Dollars be for the 20 weeks, assuming the additional purchase was not made? (1.5 Marks)

c. What would be the Maintained Markup $ and % be for the entire 20 weeks of selling? (1.5 Marks)

d. Will the Buyer meet her target MMU of 50%? (1 Mark)

15) Based on your answers to questions (10) – (13) above, using the table provided, answer the following questions: Show your work (formulas used) in the space provided in the table. Show any written answers required below the table:

If the Buyer DOES purchase the additional units:

a. What would the Total Cost Dollars of all the Purchases for the season be (the initial and the promotional)? (1.5 Marks)

b. What would the Total Retail Sales Dollars be for the 20 weeks, assuming the additional purchase was made? (1.5 Marks)

16) Based on your answers to questions (14) above, using the table provided, answer the following questions: Show your work (formulas used) in the space provided in the table. Show any written answers required below the table:

If the Buyer DOES purchase the additional units:

a. What would be the Maintained Markup $ and % be for the entire 20 weeks of selling? (1.5 Marks)

b. Will the Buyer meet her target MMU of 50%? (1Mark)

c. Should the buyer purchase the additional units or not? Why or why not? (2 Marks)