The initial markup is the average markup required on all products to cover the cost of all items, incidental expenses, and to obtain a reasonable profit. The initial dollar markup is expressed as a percentage. Initial pricing of a product is an important step in merchandising. For example, the Keystone Method and Dollar Markup Method are techniques used to determine an initial mark-up. Care must be taken to make sure that the initial markup (IMU) on those products are optimized. When the markup is too low, retailers lose profits. When the markup is too high retailers lose sales. Formula: Initial Markup % = (Expenses + Reductions + Profit) ÷ (Net Sales + Reductions)
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