question

Conversion Rate

answer

Total # of transactions divided by Total # of Customers entering the store (28 transactions were made and 121 customers entered) 28 x (100) / 121 = 23%

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COST OF GOODS SOLD (COGS)

answer

BEGINNING INVENTORY + PURCHASES - ENDING INVENTORY

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GROSS MARGIN DOLLARS

answer

SALES - COST OF GOODS SOLD

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GROSS MARGIN %

answer

GROSS MARGIN DOLLARS / NET SALES DOLLARS (multiply by 100 to express as percentage) or (SELLING PRICE - COST) x 100 / SELLING PRICE

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$ COST

answer

$ RETAIL X (100 - GM %) / 100

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MARK UP %

answer

($ RETAIL x 100 / COST) - 100

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$ RETAIL

answer

$ COST x (100 + MARK-UP %) / 100

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$ MARKDOWN

answer

ORIGINAL RETAIL PRICE - LOWER RETAIL PRICE

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MARKDOWN %

answer

$ MARKDOWN / $ NET SALES (multiply result by 100 to express as percentage)

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PLANNED STOCK

answer

PLANNED MONTHLY SALES X STOCK TO SALES RATIO

question

STOCK TO SALES RATIO

answer

BEGINNING OF MONTH $ STOCK / SALES FOR PERIOD

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AVERAGE STOCK

answer

SUM OF EACH PERIODS BEGINNING OF PERIOD STOCK + THE LAST END OF PERIOD STOCK / # OF PERIODS

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Sales per Transaction

answer

Total Net Sales / Total Number of Transactions

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Sales per Square Foot

answer

Net Sales / Square Footage of Selling Space

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Operating Costs as a Percent of Net Sales

answer

Operating Costs / Net Sales (multiply result by 100 to express as percentage)

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Inventory Turnover Rate

answer

Net Sales / Average Retail Value of Inventory

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Gross Margin Return On Inventory Investment (GMROII)

answer

GMROII = GM% x (Sales / Average Value of Inventory)

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Retailing

answer

the act of a retailer purchasing goods that are then resold to consumers for post-purchase use or final consumption

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Cost

answer

the wholesale cost of an item (cost of goods, or COG)

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Markup

answer

the difference between the retail price and the cost of goods sold; it includes operating expenses, retail reductions, and profit

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Retail

answer

the wholesale cost of goods plus the markup

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Retail price elements

answer

wholesale cost, markup, retail price

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keystone markup

answer

a markup that doubles the invoiced cost of the item to achieve the retail price (cost$ x 2)

question

individual markup

answer

the markup found on one item/SKU

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gross markup

answer

when multiple units are considered together. formula: gross markup$ = markup A$ + markup B$ +...+ markup X$

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total markup

answer

same as cumulative markup

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average markup

answer

calculates markup over items of merchandise, over groups of merchandise items, or across departments or stores. formula: total R$ - total C$ = total MU$; or total R$ x total MU% = total MU$. average markup percentage formula: average MU% = total MU$/total R$

question

cumulative markup

answer

calculates markup over time; the markup for the year, i.e. add it all together

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maintained markup

answer

used to distinguish between costs directly attributable to the vendor charges for merchandise and the more general costs or incomes associated with handling the goods. formula: MMU$ = NS$ x MMU%; or MMU% = MMU$/NS$

question

gross margin

answer

formula: GM = NS - COG; GM$ = NS$ X GM%

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initial markup

answer

the markup used to relate markup to the gross sales value; it contains all of the costs of operating a business except invoice COG; therefore, by definition, the IMU$ formula is: IMU$ = OE$ + P$ + RED$ + T$ + ALT$ - CD$; or IMU$ = GS$ - invoice$; or IMU$ = GS$ x IMU%; or IMU% = IMU$/GS$

question

price lines

answer

levels used for groups of merchandise and are used to help the consumer discriminate among the similar items; the levels of price points are set at low, moderate, adn high.

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price points

answer

same as price lines

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component addition

answer

builds the price of each item in the inventory from the cost of the item and the needed markup; this method is often used when a retailer is opening a new business and has limited past experience with pricingop

question

market pricing

answer

often used for popular fashion goods and new items, or in highly competitive markets; the retail price is established by estimating hte price desired by the target market.

question

past record

answer

for a store with a sales history, they provide a record of accomplishment for the sale of similar items. In this method; the historical retail records are used as a starting point for establishing current retail prices.

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net sales

answer

actual retail sales; the retail price at which one tiem is sold is combined with the retail prices of all the items that are sold to become the net sales amount.

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loss

answer

what happens when your expenses, etc. are higher than your sales

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profit

answer

what happens when your sales are higher than your expenses, etc.

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planning tool

answer

the profit and loss statement acts as this before the year or other period occurs

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analysis tool

answer

the profit and loss statement acts as this because, after the planned period passes, the actual amounts collected and paid can be compared to the planned amounts from the P & L statement.

question

profit and loss statement

answer

a formal document that is used for a variety of functions within a retail business; it provides a big picture look at the succinct expression of the sales, markup, and profit for a business

question

income statement

answer

another name for the P & L statement mainly used by managers planning sales or accountants formulating analyses

question

operating statement

answer

another name for the P & L statement that does not have a negative connotation of the word loss

question

operating expenses

answer

the sum of the cost of doing business, except the cost of goods; they include such items as sales persons' salaries , bags, paper and pencils, and cleaning of carpets...

question

cost of goods

answer

wholesale cost

question

gross sales

answer

when refunds or retail price reductions are given to customers, these activities reduce the value of this (also known as initial sales). formula: GS = NS + RED; GS$ = NS$ X GS%

question

alterations

answer

the expenses that occur in preparing the merchandise to be placed on the floor or to be sold to a specific customer

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cash discounts

answer

the reductions in the billed costs or list cost that retailers receive from vendors when the bill is paid by a preset date

question

employee discounts

answer

special reductions in the retail price of items sold by the business to the employees of the business

question

direct expenses

answer

can be directly attributed to a department, a function, or a specific activity. ex: specialized hangers used in the suit department, salaries for each dept., etc.

question

indirect expenses

answer

general expenses that are incurred from running the total business and are not directly caused by any one activity. ex: heating, carpet cleaning, rent, utilities, etc

question

reductions

answer

are more than a simple lump-sum value and include the elements of customer returns, employee discounts, markdowns, and stock shortages (CREDMSS); formula: RED$ = CR$ + ED$ + MD$ +SS$

question

stock shortages

answer

the inventory that is lost, stolen, or damaged; these shortages reduce the number of items that can be sold to the customer

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rent

answer

part of indirect operating expenses

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customer returns

answer

part of reductions

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utilities

answer

part of IOE

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payroll

answer

part of IOE

question

shrinkage

answer

loss of items due to damaged goods, stealing, etc.

question

transportation

answer

the cost of moving from the vendor's warehouse (loading dock) to the retail warehouse or store (loading dock), may also include insurance to cover the merchandise while in transit

question

pricing strategy

answer

the pricing policy of the business; price must fit the image and can range from full price to everyday discounted prices

question

strategic planning

answer

a series of steps or a process of operating a company according to a plan that has specific goals and can assist owners and managers to seek answers to these broad questions; there are 9 steps

question

stock turn

answer

a value or an expression of how fast merchandise moves through the store; also called turn. formula: turn - NS$ / Average Stock$ (average stock$ = BOM$ + EOM$)/(#BOM + 1)

question

stock-sales ratios

answer

relate stock requirements to planned sales and are an indication of the dollars of inventory needed to sell one dollar of merchandise. formula: BOM$ = S-SR x planned monthly sales$ (put x in for S-SR and solve for x)

question

stock on hand

answer

floor stock and back room stock combined

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stock on order

answer

stock that has been ordered from the manufacturer or vendor but has not yet been received by the retailer

question

average stock

answer

the amount of stock that is generally carried in the store during a select period. formula: AS$ = (BOM$ + EOM$)/2

question

basic stock

answer

provides a constant supply of merchandise or back-up inventory. formula: basic stock$ = AS$ - Average monthly sales$

question

BOM

answer

the level of stock at the beginning of the month or on the first working day of the month

question

EOM

answer

the level of stock at the end of the month or on the last working day of the month

question

cost plus method

answer

the markup is established by the component addition method. formula: planned sales$ = Planned C$ + Planned MU$

question

market study method

answer

combines two areas of information: the dollars per capita for the item and the number of consumers in the market share. formula: planned sales$ = (expenditure$ per capita x population #) x market share%

question

square foot method

answer

the size of the selling floor is measured, and the square footage is multiplied by an estimate of dollars per square foot, i.e.: planned sales$ = # sq. ft. x $ per sq. ft.

question

stock-sales ratio method

answer

uses predetermined ratios for estimating stock relative to sales. formula: BOM$ = S-SR x planned monthly sales$

question

six-month plan

answer

a working document that the retailer uses to transition from the expanded P & L statement to the assortment plan for shopping in the market

question

total planned sales

answer

the NS amount in a six-month plan; formula: total planned sales$ = base period sales$ + (base period sales$ x increase%)

question

total planned reductions

answer

the RED amount in a six-month plan; formula: total planned reductions$ = total planned sales$ x total planned reduction%

question

planned purchases at cost

answer

are used to indicate the wholesale value of the merchandise and are called OTB; formula: total plan R$ = BOM R$ + planned purchase R$

question

planned purchases at retail

answer

indicates the amount of merchandise that can be brought into stock during a given period; formula: total plan C$ = BOM C$ + planned purchase C$

question

meet plan

answer

to "meet plan" implies that that the actual values of that are transcribed through the store activities are comparable to the values created in the plan. Thus, the ability to plan well and to execute the plan becomes an important part of the buyer's job

question

OTB at cost

answer

planned purchases at cost

question

OTB at retail

answer

planned purchases at retail

question

assortment plan

answer

an organized collection of related merchandise, which includes specifications for brands, colors, sizes, and material

question

merchandise classification

answer

sorts products by distinctive features and provide structure and organization for a collection of items

question

classification criteria for apparel

answer

gender, end use, fashionability, and seasonality

question

sort

answer

the process of creating order to a set of levels or product characteristics

question

customer attracting features

answer

the features for which the customer looks (CAF)

question

outline format

answer

a more commonly used classification system

question

tree format

answer

a format for a classification system that involves branches and twigs

question

unit control

answer

financial controls that are related to the merchandise that is sold; it is a technique where the buyer examines the cost, retail sale, and markup of the items that are sold by the retailer

question

overbought

answer

when slaes plans are overestimated and the stock purchases result in a stockpiled inventory

question

underbought

answer

when sales plans are underestimated and the stock purchases result in a low inventory

question

quantity discount

answer

given when the buyer purchases a large number of units within one SKU

question

trade discounts

answer

so called because each discount is taken from the preceding net amount before applying the next amount; this happens when the vendor offers less services in exchange for a discount

question

series discounts

answer

another name for a trade discounts

question

cumulative discountss

answer

another name for a trade discount

question

invoice

answer

COG

question

terms

answer

include the discounts, cash dating, deliver time and method, loading, and anticipation that may be assigned to any merchandise order.

question

dating

answer

indicates when the cash discount process will begin

question

types of dating

answer

COD, DOI, ROG, EOM, X dating, "as of"

question

COD

answer

cash on delivery; this dating is used when the vendor does not know the retailer or the retailer does not have a strong line of credit

question

DOI

answer

date of invoice, the cash discount terms will have no dating within the discount statement; ex: 4/10, n/30

question

ROG

answer

receipt of goods; the cash discount period and net period begin with the date of receipt of goods; ex: 8/10 ROG, n/30

question

EOM (in terms of invoice)

answer

end of month; dating starts with the end of the month and the invoice is to be paid within the specified number of days after the end of the month in which goods are invoiced; ex: 8/10 EOM, n/90

question

X-dating

answer

extra dating; this dating includes extra dating and extends credit for additional days in which to receive the discount, ex: 8/10-30x

question

"as of"

answer

this dating is advanced dating and indicates that the goods have been "postdated" to allow for the shipment or to allow extra time for discount.

question

net period

answer

when the full amount of the bill is due, ex: n/30

question

on percent method

answer

how the buyer can find the trde or series discounts; this method is a shortcut method for finding the final discount and involves finding the complements of the discounts and using them to find the final discount price

question

value base

answer

the beginning value or standard used for affixing a price or value on the merchandise

question

cost price method (inventory valuation)

answer

the retailer uses the invoice costs or the cost prices that are assigned by the vendr as the value base for the inventory

question

retail price method (inventory valuation)

answer

the retailer uses the retail price or the selling price as the value base for the inventory.

question

Individual SKU method

answer

this method tracks each individual SKU with an entry value and accounts for every price change; this method is extremely accurate

question

quick method

answer

uses the total retail sales for a period as the value base for the inventory; cost or value of the inventory is calculated based on a percentage of the retail sales

question

physical inventory

answer

a count of every item on the floor, in stock rooms, warehouse, etc. to determine whether shortages or overages are occuring

question

book value

answer

the value of the inventory as kept in the handwritten ledgers or computer system; formula: book$ = merchandise available$ - NS$ - (MD$ + ED$)

question

overages

answer

overage$ = book$ - physical count$; overage% = overage$/NS$

question

shortage

answer

shortage$ = book$ - physical count$; shortage% = shortage$/NS$

question

markdown cancellation

answer

the amount of markdown that is not used or the difference between the sales price and the retail 3 price; formula: markdown cancellation$ = (#markdown - #sold) x (retail 3$ - retail 2$)

question

net markdown

answer

the amount of markdown that was actually used; formula: net markdown$ = gross markdown$ -markdown cancellation$

question

gross markdown

answer

when multiple numbers receive a markdown; formula: gross markdown$ = (#units x MD$) + (#units x MD$) +...

question

steps in strategic planning

answer

1. develop a vision statement for the company, 2. scan the internal and external environments, 3. determine issues critical to the company, 4. select the problem to be solved, 5. determine the specific strategy to achieve the solution, 6. identify a plan of action within the specific strategy, 7. implement the specific activities and monitor the process, 8. evaluate the outcome of the specific activities, 9. make recommendations for the future

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