Math for retail buying

The flashcards below were created by user jnetters10 on FreezingBlue Flashcards.

  1. cost
    amount the retailer pays for purchases
  2. retail
    price at which stores offer merchandise for sale to consumer
  3. function of retail sotres
    sell merchandise to consumers at a profit
  4. five basic profit factors
    • operating income (sales volume)
    • cost of goods sold
    • gross margin
    • operating expenses
    • net operating profit (net profit)
  5. operating income
    • also known as sales volume
    • indicates in dollars how much merchandise has been sold
  6. cost of goods sold
    shows amount paid for goods sold
  7. gross margin
    • results from cost of goods sold
    • the total cost of goods subtracted from net sales
  8. operating expences
    expenses other than the cost of the goods incurred in the buying selling process
  9. net operating profit
    • also known as the net profit
    • when all the operating expenses are deducted from gross margin figure
  10. gross sales
    the entire dollar amount reveived for goods sold during a given period

    multiply retail price of individual items of merchandise by number of pieces actually sold to consumers
  11. what must and accurate calculation of gross sales take into accound
    adjustments because of returns and price reductions
  12. customer returns
    merchandise is returned to stock and customer reveives a cash refund or a charge credit
  13. custoemr allowance
    if customer reveices a price reduction after sale is completed
  14. customer returns and allowances
    the collective term for customer returns and customer allowances
  15. what must happen when a customer return or allowance takes place
    the previously recorded sale must be canceled and subracted from the gross sales amount
  16. net sales
    • sales total after customer returns and allowances have been deducted from gross sales
    • actual amount of goods actually stayed sold
  17. cost of goods sold
    cost of the merchandise that has been sold during a given time period
  18. calculation of cost of goods sold requires what adjustments
    • transportation cost (inward freight)
    • alteration and workroom costs
    • cash discounts
  19. transportation costs
    • also known as inward freight
    • amount a vendor may charge for transporting merchandise to designated premises of retailer
  20. alteration and workroom cost
    • charge to a selling department when it is necessary to treat merchandise so that it will be in condition for sale
    • (assembling, polishing, making cuffs)
  21. cash discounts
    a percentage deducted from the invoice cost that vendors may grant for the payment of an invoive within a specified period of time
  22. gross margin
    difference between net sales and the total cost of merchandise sold

    indicates buyers ability to purchase right merchandise negotiate right cost and credit terms and put right retail price
  23. two categories of operating expenses
    • direct expenses
    • indirect expenses
  24. direct expenses
    • expenses that are specific to a give department and that would cease if department were discontinued
    • (salaries of buyer, assistant buyer, sales people, departmental advertising, selling supplies, delivery expenses)
  25. indirect expenses
    • store expenses that exist whether a department is added to or discontinued
    • (store maintenance, insurance, salaries of top management)
  26. operating expenses
    those expenses other than the cost of goods incurred in the buying selling process
  27. net operating profit
    • net profit
    • cost of goods deducted from the amount of gros margin
  28. gross sales
    total of all prices charged to consumers on individual items x number of units actually sold
  29. dollar customer returns and allowances
    total of all refunds or credits to the customer on individual items of merchandise x number of units actually
  30. customer returns and allowances %
    $ customer returns and allowances / gross sales
  31. dollar customer returns and allowances
    gross sales x customer returns and allowances percentage
  32. net sales
    gross sales - customer returns and allowances
  33. department's net sales % of total store sales
    departments net dollar sales / store's total net dollar sales
  34. gross sales
    net sales / [100%(Gross sales) - customer returns and allowances %]
  35. billed cost
    the purchase price that appears on the invoice
  36. billed delivered cost
    billed cost plus the transportation cost
  37. what can be added to subtracted to billed cost
    • transportation cost
    • alteration and workroom costs
    • cash discounts
  38. total cost of merchandise
    billed cost + inward transportation charges + workroom costs- cash discount
  39. gross profit
    another name for gross margin
  40. net loss
    when the difference between gross profit is not large enough to couver operating expenses
  41. gross margin
    net sales - total cost of goods sold
  42. operating expenses expenses
    direct expenses + indirect
  43. operating expense %
    operating expense / net sales
  44. controllable expenses
    expenses that are controlled by utilization

    (amount of electricity used NOT THE RATES)
  45. contribution
    • also known as controllable margin
    • expenses that are direct, controllable or a combination of direct and controllable

    also defined as the amount the department contributes to indirect expenses and profit
  46. net operating profit (net profit)
    gross margin- operating expenses
  47. common measurments used by management that evaluates performance of a buyer
    • sales results
    • inventory results
    • margin results
    • net operating profit results
  48. Sales results
    • measured in dollars
    • indicates how well merchandise purchased has been accepted priced and soldgoal is to increase can also be measured in units, numbers of sales transactions, and sales per square foot of selling space
  49. Inventory results
    • refers to the amount of merchandise in stock as shown by stock turn
    • goal set management
    • control of shirnkage or shortage is another criterion of buyers performance
  50. stock turn
    sales for that period / average stock for that period
  51. margin results
    achieved by pricing merchandise at a profitable initial markup, realizing a planned gross margin after performing the specialized task of selecting vendors negotiating cost and other terms of sale included in total cost of merchandise delivered and sold when subtracted from net sales achieved
  52. initial markup
    aggregate original retial prices minus cost of good sold including cash discounts and alteation cost
  53. net operating profit results
    gross margin - all expenses chargeale to selling department
  54. profit and loss statement (income statement)
    • summarizes the basic merchandizing factors that affect profit results as it shows the difference between income and expenses
    • analyzed at intervals to determine whether transactions have resulted in profit or loss
  55. balance sheet
    shows assets liabilities and net worht of a business
  56. basic format of a profit and loss statement
    • Net sales
    • - cost of goods sold

    • = gross margin
    • -operating expenses

    =net profit or loss
  57. skeletal profit and loss statement
    a quick method to determine at any particular time any given departmens profit or loss
  58. what is a meaningful way to compare departmental performances
    compare the respective results expressed as percentage of the net sales volume
  59. three major factors that show if profit will vary upward or downward
    • net sales
    • cost of goods sold
    • operating expenses
  60. cost of goods sold %
    cost of goods sold ($) / net sales
  61. Gross margin %
    gross margin ($) / net sales
  62. operating expenses %
    direct and indirect expenses ($) / net sales
  63. net profit %
    net profit (%) / net sales
  64. how to find $ amounts from % (cost of goods sold, gross margin, operating expenses, net profit)
    multiply % by the net sales
  65. final profit and loss statement
    • shows the basic profit factors developed in detail so that every transaction is clearly seen
    • includes addition information pertaining to stock levels
  66. opening inventory
    refers to retail value of the merchandise in stock at the beginning of the acounting period

    established by a physical count
  67. closing inventory
    amount of merchandise in stock at the end of the period under consideration
  68. total merchandise handled
    • opening inventory added to the cost of new net purchases and the transportation charges
    • sum of merchandise at cost available for sale
  69. categories of income from sales
    • gross sales
    • customer returns and allowances
    • net sales figure

    (know formulas for all, other flash cards)
  70. categories of merchandise sold
    • opening inventory at retail
    • opening inventory at cost
    • new net purchases
    • inward transportation
    • total merchandise handeled at cost
    • closing inventory at cost
    • gross cost of merchandise sold
    • cash discounts
    • net cost of goods sold
    • alteration and workroom costs
    • total cost of goods sold
    • gross margin
  71. opening inventory at retail
    amount of merchandise at the beginning of a period, counted and recored at current selling price
  72. opening inventory at cost
    figure derived from the retail figure by applying a markup percentage to total merchandise handled
  73. new net purchases
    • billed cost of merchandise purchased
    • gross purchase - returns and allowances to vendors
  74. total merchandise handled at cost
    sum of opening inventory puls total cost of purchase
  75. gross cost of merchandise sold
    total merchandise handled at cost less the cost of the closing inventory
  76. categories in operating expenses
    • direct expenses
    • indirect expenses
    • total operating expenses
  77. 3 ways to improve profits
    increase sales withh only a propotionate increase in the cost of the merchandise a little or no increase in expenses

    decrease the cost of merchandise sold without a decrease in sales

    reduce expenses

    it is counter productive to change all 3 at same time
  78. strategies used to increase sales
    • price merchandice competitively
    • analyze regional customer preferences to achieve proper assortment
    • respond quickley to product performance
    • minimze out of stock items
    • control amount and timing of markdowns
  79. strategies used to decrease cost of goods
    • sell larger proportion of higher markup goods
    • develop and maintain vendor relationship that results in advantagous actions concerning new market developments, shipment preferences and competitive pricing
    • qualify for greater quantity, cash discounts, lower shipping terms etc
    • develop private brands that offer one of a kind merchandice, exceptional value at negotiable cost
  80. strategies used to lower or reduce expense
    • lean retailing (optimizing all functions that pertain to buying selling process from recieving room to sales floor)
    • maximize selling floor space with improved presentation to facilitate easy selling
    • forecast and plan all sales promotion activities to produce maximum results and effectiveness
    • look for innovative ideas to improve customers in store experiences
  81. will you pass or fail
Card Set
Math for retail buying
Test 1 Math for retail buying
Show Answers