What Is a Benefit of Markdowns for a Department Store

question 123

Multiple Choice

What is a benefit of markdowns for a department store?

• A) It rids the store of obsolete merchandise.
• B) It is a way to make room for new merchandise.
• C) Markdowns generate cash flow to pay for new merchandise.
• D) It increases customers' traffic.
• E) All of these.

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Definitions:

Fixed Selling Expense

Expenses that remain constant regardless of the volume of goods or services sold, such as salaries and rent for the sales department.

Variable Administrative Expense

Expenses that fluctuate in total in direct proportion to changes in activity level, such as sales volume or production output.

Gross Margin

The difference between revenue and cost of goods sold, divided by revenue, expressed as a percentage. It represents the percentage of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold.

Variable Selling Expense

Costs that vary directly with the volume of sales, such as commissions, shipping charges, and promotional expenses.