Assignment 2: Final Project: South Beach Boutique: Summer Quarter
The impact of June promotion on sales has inspired Julie and Tracy to reduce their advertising expense by planning better promotions for the pre-fall quarter. Since the boutique does roughly 45% of their total sales in the summer months, the summer quarter is the best time for Julie and Tracy to make strong business decisions and maximize customer traffic, good weather, and a strong inventory assortment.
Part 1: The Sale
As part of South Beach Boutique’s End-of-Summer Blow-Out sale, they plan to mark down all goods sold during Labor Day week by 15%. This is an opportunity to clear out old inventory as they prepare for the fall and winter and look at new inventory for the coming calendar year.
Part 2: The Benefit
In addition, Tracy becomes a sponsor to a local Art Institute campus, which offers a bachelor’s degree in Fashion Design. The school is hosting a goodwill event—a fashion show/gala to benefit a breast cancer research institute. The event has generated substantial social media buzz, and Tracy expects a large turnout.
At the event, Julie and Tracy plan to silent auction one free “shopping spree,” valued at $3,200. The sales of the tickets will benefit the cancer research institute. During late July, the fashion show costs Julie and Tracy $2,250, and the shopping spree is awarded in the second week of August.
Part 3: New Vendor
Julie and Tracy find a new vendor (Way Down) who deals in the same swimwear and accessory lines as their prior vendor (Bounce Apparel). Together, Way Down and South Beach Boutique make a deal to increase the cash discount for early payment of the invoice to 4.15% and to ship directly from the factory. Therefore, all items from Way Down arrive with prepaid freight, and Julie and Tracy manage to decrease their COGS by 1.75% for a total of 33% COGS for summer on net sales (NS) of $381,250.
Julie and Tracy have also laid off one of their full-time employees and increased their social media and Internet fees (in support of the benefit) by 20%. Advertising expense for the quarter is reduced by 10% because of establishment of the promotions. All other expenses remain the same.
This week, perform the following activities.
If Julie and Tracy have actual markdowns of 14.45% storewide for Labor Day week and the NS for that week is 25% of the NS for the entire quarter, calculate the markdown dollars for that week.
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