Double Your Profit with Keystoning Markup Strategy!
How can you determine the maximum amount you can pay for a line of handbags if the desired selling price is $180?
If you are looking for a line of handbags that will retail for $180, what is the most you can pay for the bags (in $)?
Answer:
To determine the maximum amount you can pay for a line of handbags with a desired selling price of $180, we can use the keystoning markup strategy. By doubling the cost of an item, we can arrive at the selling price. Therefore, the most you can pay for the bags is $90 in order to achieve a retail price of $180.
The keystoning markup strategy is a commonly used method in department and specialty store retailing to ensure profitability. By doubling the cost of an item, retailers can cover high operating expenses and still make a profit. In this case, if the desired selling price for the line of handbags is $180, dividing this amount by 2 gives us the maximum cost of $90.
It is important to note that not all stores utilize the keystoning markup strategy. Some may have different markup percentages or pricing strategies based on various factors such as competition, market demand, and brand positioning. However, for apparel, cosmetics, fashion accessories, shoes, and other merchandise categories, this strategy is widely used.
By understanding and applying the keystoning markup strategy, retailers can effectively manage their finances and ensure they are covering expenses while maximizing profits. This simple yet effective method allows businesses to set competitive prices while maintaining financial stability.