Rounding off to 2 decimals
June 5th, 2005 by Anand
Over the weekend, went to a sporting goods store which has been growing tremendously over last 2-3 years. The bill amount was $119.96 and the state that I live in has a 5% sales tax. So the tax amount according to the bill was $6.00 (actually 5% of $119.96 is $5.998).
So I decided to spend some time and analyze about the pricing strategy that companies use especially marking products as $x.99 or $xx.99. How much do we lose and how much does a company gain.
Some of the assumptions that I made were:
1. Roughly 100 customers buy things in each store everyday.
2. The sporting goods store has roughly 1000 branches in US.
so here is the calculation.
Bill Amt$ - 0.99
Sales Tax - 5%
Sales Tax $ - 0.0495
You paid$ - 1.04
You Pay$ - 1.0395
Profit per store/day $ - 0.1
profit per store/year $ - 35.5
Total Profit for all store $ - 35500
So is rounding off to 2 decimal good for customer or its robbing of their cents. What do you think.
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