AMD 376: Merchandising, Planning, & Control Notes 3
AMD 376: Merchandising, Planning, & Control Notes 3 AMD 376
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This 5 page Class Notes was uploaded by Clare Schubert on Monday February 1, 2016. The Class Notes belongs to AMD 376 at Iowa State University taught by Amy Dorie in Spring 2016. Since its upload, it has received 12 views. For similar materials see Merchandising Planning, & Control in General at Iowa State University.
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Date Created: 02/01/16
AMD 376 - Examples EX: Net sales for a department were $128,644; customer returns were $6,846. What was the percent of returns? Gross Sales $135,490 Customer Returns - $6,846 5.05% Net Sales $128,644 Gross Sales = $128,644 + $6,846 = $135,490 Customer Return % = $6,846/$135,490 = 5.05% EX: Net Sales of handbags were $187,680. Customer returns were 8.5%. Find gross sales. Gross Sales $205,115 100.0% Customer Returns 8.5% Net Sales $187,680 Gross Sales = $187,680/(100%-8.5%) = $187,680/0.915 = $205,115 Chapter 4 Total cost of merchandise sold is influenced by several factors (must be controlled): Billed Cost of Merchandise Transportation Cash Discounts Alteration/Workroom Costs Cost of Goods Sold: Opening Inventory (cost) + Purchases (cost) + Transportation Total Merchandise Handled (TMH) - Closing Inventory (cost) Gross Cost of Merchandise Sold (total amount invoiced) - Cash Discounts + WorkRoom/Alteration Costs - RTV (Return to Vendor) Net Cost of Goods Sold Calculate Net Cost of Goods Sold: Opening Inventory $160,000 + Purchases $120,000 + Transportation $400 TMH $280,400 - Closing Inventory $150,000 Gross COGS $130,400 - Cash Discount $3,600 + WorkRoom $380 - Return to Vendor $1,600 Net COGS $125,580 Given Net Sales of $498,000 what is the GM%? Net Sales $498,000 Net COGS - $125,580 $372,420/498,000 = 74.8% EX: Given an opening inventory of $190,642, closing inventory of $157,989, purchases of $115,700, transportation costs of $480, and cash discounts of 1.5%... Calculate Total Merchandise Handled, Gross Cost of Merchandise, and Net Cost of Merchandise Sold: Opening Inventory $190,642 + Purchases $115,700 + Transportation $480 Total Merchandise Handled $306,822 - Closing Inventory $157,989 Gross COGS $148,833 - Cash Discount $1,735.50 1.5% Net COGS $147,097.50 $115,700 X 0.015 = $1,735.50 Inventory Productivity Common methods include: Stock Turnover, Gross Margin, Gross Margin Return on Inventory EX: Calculate the GMROI for this year and last year and determine if the GMROI has improved: This year average inventory at cost was $62,900 while last year it was $61,600. Last year net sales were $280,779 and this year they improved to $281,444. The gross margin percent for last year was 52% and this year it was 52.5%. TY GM = NS x GM % = 281,444 x 0.5250 = 147, 758.10 TY GMROI = GM/AIC = 2.35 LYGM = 280,779 X 0.52 = 146,005.08 LYGMROI = 146,005.08/61,600 = Private Label Goods: Merchandise that carry the retailer’s label Merchandise sold exclusively by retailer Allow merchant to choose more cost efficient styles Help retailer reduce costs and create high gross margin merchandise Quoted Wholesale Price – cost as told by wholesaler, rarely net cost or exact amount paid Invoice – bill associated with a shipment of merchandise, documentation of the final costs Discounts – a reduction price allowed by the vendor Quantity – allowed when a large specified quantity is purchased, encourages buyers to concentrate purchases from a vendor, seldom available for apparel purchases, regulated by Robinson- Patman Act Trade – depend on “function” of the purchaser, may be a single or “series” of percent discounts, direct method, complement method, on-percent method Seasonal – for ordering or accepting merchandise out of season, encourages retailers to place orders for merchandise ahead of usual buying season, must have storage space to take advantage Cash – percent discount from quoted cost for prompt payment EX: The coat buyer ordered 18 raincoats that cost $39.00 each. An 8% discount is deducted. What amount is paid to the vendor? 18 X $39 = $702 X 8% = 56.16 $702 – $56.16 = $645.84 DATING Invoice – day sent Receipt – day we receive the inventory Discount – prompt payment date Net Payment – date bill is due if you don’t take advantage of the discount Cash on Delivery – no credit granted, must purchase merchandise on the basis of cash on delivery (COD), offered to companies deemed a credit risk such as those with poor or no credit history Regular Dating – ordinary/normal dating, written as 3/10, n/30, or 3/10 (discount if you pay within 10 days of the invoice or pay total within 30 days) o EX: Calculate discount and net payment dates for an invoice dated Oct. 15 with terms 2/10, n/30. o 2% discount within 10 days of payment (last day taken Oct. 25) o Or if not paid by Oct. 25 pay total amount on Nov. 14 Receipt of Goods (ROG) – calculated from date the merchandise is received by the retailer, written as 2/10 ROG, buyer must pay will within 10 days of the delivery date (receipt) of goods to receive the cash discount, net payment date is another 20 days from the discount date o EX: Calculate discount and net payment dates for an invoice dated March 5 , a receipt date of March 12, and terms of 2/10 ROG. o The last day on which the 2% cash discount can be taken is March 22 nd nd th o If not paid by March 22 , full amount due April 11 End of Month – calculated from the end of the month instead of invoice date, written as 8/10 EOM (buyer must pay bill within 10 days of the last day of the month on the invoice to receive the th cash discount, additional 20 days to pay net payment, 26 or later is consider next month) o EX: Calculate discount and net payment dates for an th st invoice dated June 11 , a receipt date of July 1 , and terms of 8/10 EOM. o Last day on which the 8% cash discount can be taken is th July 10