Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller

Exercise 65

RECREATIONAL EQUIPMENT INC. (REI)
www.REI.com
Facts:
• 1938: Established by 23 mountaineers
• 2001: Exceeded 2 million members
• 2005: Annual sales passed $1 billion
• 2010: More than 100 stores, 8000 employees, and 3.7 million members
REI has always had a focus on the great outdoors. The firm is a cooperative-anyone can shop there but membership is based on those who pay a one-time fee of $15 to join. Members are the owners of the company and each shares in profits by receiving annual dividends based on profits and amount of his or her purchases.
The marketing manager at REI was interested in a new line of skis developed by Shaman Industries. These skis are designed for off-piste skiing, which means skiing over rugged terrain and even jumping off of cliffs. Since REI prides itself on having the best in outdoor gear, the manager works with James Smelter in inventory to place an order for 15 pairs of the new skis to test the quality. Shortly thereafter, they order an additional 22 pairs of a different model of ski also manufactured by Shaman Industries.

Assume that operating expenses at REI are 22% of cost and determine the amount of any profit on these skis. If there was no profit, find the amount of the operating loss or the absolute loss.