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cost
amount the retailer pays for purchases
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retail
price at which stores offer merchandise for sale to consumer
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function of retail sotres
sell merchandise to consumers at a profit
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five basic profit factors
- operating income (sales volume)
- cost of goods sold
- gross margin
- operating expenses
- net operating profit (net profit)
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operating income
- also known as sales volume
- indicates in dollars how much merchandise has been sold
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cost of goods sold
shows amount paid for goods sold
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gross margin
- results from cost of goods sold
- the total cost of goods subtracted from net sales
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operating expences
expenses other than the cost of the goods incurred in the buying selling process
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net operating profit
- also known as the net profit
- when all the operating expenses are deducted from gross margin figure
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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
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what must and accurate calculation of gross sales take into accound
adjustments because of returns and price reductions
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customer returns
merchandise is returned to stock and customer reveives a cash refund or a charge credit
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custoemr allowance
if customer reveices a price reduction after sale is completed
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customer returns and allowances
the collective term for customer returns and customer allowances
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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
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net sales
- sales total after customer returns and allowances have been deducted from gross sales
- actual amount of goods actually stayed sold
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cost of goods sold
cost of the merchandise that has been sold during a given time period
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calculation of cost of goods sold requires what adjustments
- transportation cost (inward freight)
- alteration and workroom costs
- cash discounts
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transportation costs
- also known as inward freight
- amount a vendor may charge for transporting merchandise to designated premises of retailer
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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)
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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
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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
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two categories of operating expenses
- direct expenses
- indirect expenses
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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)
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indirect expenses
- store expenses that exist whether a department is added to or discontinued
- (store maintenance, insurance, salaries of top management)
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operating expenses
those expenses other than the cost of goods incurred in the buying selling process
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net operating profit
- net profit
- cost of goods deducted from the amount of gros margin
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gross sales
total of all prices charged to consumers on individual items x number of units actually sold
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dollar customer returns and allowances
total of all refunds or credits to the customer on individual items of merchandise x number of units actually
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customer returns and allowances %
$ customer returns and allowances / gross sales
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dollar customer returns and allowances
gross sales x customer returns and allowances percentage
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net sales
gross sales - customer returns and allowances
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department's net sales % of total store sales
departments net dollar sales / store's total net dollar sales
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gross sales
net sales / [100%(Gross sales) - customer returns and allowances %]
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billed cost
the purchase price that appears on the invoice
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billed delivered cost
billed cost plus the transportation cost
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what can be added to subtracted to billed cost
- transportation cost
- alteration and workroom costs
- cash discounts
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total cost of merchandise
billed cost + inward transportation charges + workroom costs- cash discount
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gross profit
another name for gross margin
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net loss
when the difference between gross profit is not large enough to couver operating expenses
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gross margin
net sales - total cost of goods sold
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operating expenses expenses
direct expenses + indirect
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operating expense %
operating expense / net sales
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controllable expenses
expenses that are controlled by utilization
(amount of electricity used NOT THE RATES)
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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
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net operating profit (net profit)
gross margin- operating expenses
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common measurments used by management that evaluates performance of a buyer
- sales results
- inventory results
- margin results
- net operating profit results
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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
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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
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stock turn
sales for that period / average stock for that period
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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
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initial markup
aggregate original retial prices minus cost of good sold including cash discounts and alteation cost
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net operating profit results
gross margin - all expenses chargeale to selling department
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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
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balance sheet
shows assets liabilities and net worht of a business
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basic format of a profit and loss statement
- Net sales
- - cost of goods sold
- = gross margin
- -operating expenses
=net profit or loss
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skeletal profit and loss statement
a quick method to determine at any particular time any given departmens profit or loss
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what is a meaningful way to compare departmental performances
compare the respective results expressed as percentage of the net sales volume
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three major factors that show if profit will vary upward or downward
- net sales
- cost of goods sold
- operating expenses
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cost of goods sold %
cost of goods sold ($) / net sales
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Gross margin %
gross margin ($) / net sales
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operating expenses %
direct and indirect expenses ($) / net sales
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net profit %
net profit (%) / net sales
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how to find $ amounts from % (cost of goods sold, gross margin, operating expenses, net profit)
multiply % by the net sales
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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
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opening inventory
refers to retail value of the merchandise in stock at the beginning of the acounting period
established by a physical count
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closing inventory
amount of merchandise in stock at the end of the period under consideration
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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
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categories of income from sales
- gross sales
- customer returns and allowances
- net sales figure
(know formulas for all, other flash cards)
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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
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opening inventory at retail
amount of merchandise at the beginning of a period, counted and recored at current selling price
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opening inventory at cost
figure derived from the retail figure by applying a markup percentage to total merchandise handled
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new net purchases
- billed cost of merchandise purchased
- gross purchase - returns and allowances to vendors
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total merchandise handled at cost
sum of opening inventory puls total cost of purchase
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gross cost of merchandise sold
total merchandise handled at cost less the cost of the closing inventory
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categories in operating expenses
- direct expenses
- indirect expenses
- total operating expenses
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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
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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
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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
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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
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will you pass or fail
YOU WILL PASS CAUSE YOU ARE THE ONE AND ONLY NETTERS!!!!!!!!!!!!!!!!!!!!
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