Be sure to follow the following steps before starting the assignment:
A. Project needs to be completed on Excel or Word doc.
B. Read and use both PDF files that are attached in below “Financial Formulas” and “MAR 4231 Retail Jargon” for support to answer the 3 questions that I have pasted below.
Question # 1:
A retailer has yearly sales of $650,000. Inventory on January 1 is $250,000 (at cost). During the year, $500,000 of merchandise (at cost) is purchased. The ending inventory is $275,000 (at cost). Operating costs are $90,000.
a. Calculate the cost of goods sold
b. Calculate the net profit
Question # 2:
A retailer has a beginning monthly inventory valued at $60,000 at retail and $35,000 at cost. Net purchases during the month are $150,000 at retail and $70,000 at cost. Transportation charges are $17,000. Sales are $150,000. Markdowns and discounts equal $20,000. A physical inventory at the end of the month shows merchandise valued at $10,000 (at retail) on hand. Compute the following:
a. Total merchandise available for sale – at cost and at retail
b. Cost complement
c. Ending retail book value of inventory
d. Stock shortages
e. Adjusted ending retail book value
f. Gross profit
Question # 3:
A car dealer purchased multiple –disc CD players for $1185 each and desires a 40% markup (at retail). What retail price should be charged?MAR 4231 = Financial Formulas
Note: When calculating the financials, please round to four decimal places. For example:
1.7658643983 = 1.7659 (four decimal places)
0.4322222222 = 0.4322 (four decimal places)
Asset turnover = Net sales
Total assets
Cost complement = Total cost valuation
Total retail valuation
Cost of goods sold = Cost of merchandise available for sale – cost value of ending inventory
Ending retail book value of inventory = on paper, how much is your inventory worth
(at retail) = Merchandise available for sale – Sales – Deductions
Financial Leverage = Total assets
Net worth
Gross Profit = Sales – Cost of Goods Sold
Net Profit = Gross Profit – Operating Expenses
Net Profit Margin = Net profit after taxes
Net sales
Profit & Loss Statement =
Sales – less cost of goods sold = gross profit
Return of Assets = Net profit margin x asset turnover
Return on Net worth = Net profit margin x Asset turnover x Financial leverage
Stock Shortages = Ending retail book value of inventory – physical inventory at retail
Total merchandise available (at cost) =
Beginning monthly inventory + Net purchases + transportation charges
Total merchandise available (at retail) = Beginning monthly inventory + Net purchasesRETAIL MARKETING
RETAIL JARGON / FORMULAS
Trend Definition: This year’s business vs. Last year’s business
Formula: This year’s sales / last year’s sales
Example: Year Volume
2017 12,000
2018 15,000
Trend = 15,000/12,000 = 125%
Conclusion: We sold 25% more goods this year than last year.
Sell Thru % Definition: Percentage of stock sold for a given time period.
Formula: Units sold / beginning on-hand stock
Examples: Week of January 1, 2019
Beginning on-hand stock = 1,000
Units Sold = 200
Sell thru % = 200 / 1,000 = 20%
Conclusion: We sold thru 20% of our stock in the week of January 1st.
Retail Mark-up Definition: Mark-up % which determines retail price charged to our
customers.
Formula: Retail – Cost / Retail
Example: Cost = $15
Retail = $28
$28 – ($15 / $28) = 46.4%
Conclusion: The mark-up % is 46.4%
RETAIL JARGON / FORMULAS (continued)__
Turn Definition: Amount of times the average inventory sells in a given period
(aka: “Velocity”) of time.
Formula: Sales / Average Stock
Example: Units sold = 1,525
Average stock = 600 units
Turn = 1,525 / 600 = 2.54
Conclusion: We turned our stock 2.54 times last year
Markdown % Definition: What % your markdown was to your sales volume?
Formula: Markdown dollars / sales volume
Examples: Sales volume = $52,000
Markdown $ = $3,400
Markdown % = $3,400 / $52,000 = 6.5%
Conclusion: 6.5% of our sales were markdowns.
Gross Margin: The difference between the price that the customer pays for
merchandise and the cost of the merchandise. It is the dollar amount of
profit before other expenses are subtracted.
Markdowns Percentage reduction in the initial retail price.
Market A group of vendors in a concentrated geographic location or even under
roof.
Mark Up The difference between the retail of merchandise and the cost of that
merchandise.
Open to Buy The amount of merchandise a buyer may order during the balance of a
period. Plan that keeps track of how much is spent in a month and how
much is left to spend.
Receipts Merchandise which has arrived from vendors and has been counted and
recorded as stock.
UPC Universal Product Code. Black and white bar code, found on the ticket
box of the merchandise, which has a 12 digit number assigned to it.
Vendor Any firm from which a retailer obtains merchandise.
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