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Retail Buying Math Practice

Gross margin is the amount or percentage of sales remaining after the cost of goods sold is subtracted. Gross profit is the amount or percentage of sales remaining after all operating expenses are subtracted. So gross margin only accounts for the cost of goods sold, while gross profit accounts for all expenses including selling, general and administrative costs.

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401 views25 pages

Retail Buying Math Practice

Gross margin is the amount or percentage of sales remaining after the cost of goods sold is subtracted. Gross profit is the amount or percentage of sales remaining after all operating expenses are subtracted. So gross margin only accounts for the cost of goods sold, while gross profit accounts for all expenses including selling, general and administrative costs.

Uploaded by

Andrea Vargas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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RETAIL BUYING MATH

PRACTICE
MARKUP PERCENT

An item cost a retailer $25.00. If it sold for


$90.00, what was the markup percentage?

- Markup must cover all operating expenses for a department + reasonable profit

- Markup varies by classification or department


FORMULA FOR MARKUP PERCENTAGE:

Markup Percent = (Retail – Cost)/ Retail


Or
(Cost/Retail) – 1

Solution: ($90 - $25)/$90 = 72.2%


CALCULATING COST AND RETAIL WHEN
MARKUP IS KNOWN
Solving for cost = Retail X (100% - MU%)
A buyer needs to sell a top for $90.00 and the planned markup is 72%. What is the
maximum cost that the buyer can pay for the item?
$90.00 X (100% - 72%)
$90.00 X .28 = $25.20

Solving for retail = Cost / (100% - MU%)


If a vendor charges the buyer $25.20 for the top and the markup plan is 72%, what price
will the buyer retail the item for?
$25.20/(100% - 72%)
$25.20 / .28 = $90.00
CUMULATIVE MARKUP PERCENT

• Markup achieved on all merchandise available for sale during a given period
• Inventory O/H + Purchases

How can a buyer change their strategy


when their financial goals are not being
met?
CUMULATIVE MARKUP PERCENT

• The opening inventory for the boy’s department on March 1 was


$150,000 at cost and $260,000 at retail. During the month, the
department received merchandise that cost $95,000 with a 45.5%
markup. Find the cumulative markup.
CUMULATIVE MARKUP PERCENT
SALES VS. PLAN VS. LY

•  Compare actual sales performance to plan, comp and LY

Last year, the men’s clothing department had sales of $248,936. This year sales
were $256,782. What was the percent increase in sales?
SALES VS. PLAN VS. LY

($256,782-$248,936)/$248,936 =
3.15% increase
CALCULATING PERCENT INCREASE

• If last year’s actual sales were $2,000,000 and this year's planned sales are $2,200,000
what is the percentage of sales increase?
• If last year's seasonal sales are $2,000,000 and there was a planned 10% sales increase,
what are the seasonal planned sales for this year?
MARKDOWNS

• Means of promoting and increasing sales - IMPACT ?


• Markdowns reduce the value of inventory
• First markdown is your least costly and most profitable
• What are the two types of markdowns?

A buyer reduces 93 calculators from $15 to $10. What is the total markdown in dollars?
MARKDOWNS

Solution:
Original or present retail $15
- New retail - $10
= Markdown $ = $5 per piece

Total markdown $ = $5 markdown x 93 pieces


Total markdown $ = $465
MARKDOWNS

A store advertises 25% off on a group of 50 chairs


currently retailed at $100 each. What is the total
dollar markdown?
Solution:

Percentage off = 25% x $100 Retail


Markdown $ = $25 per chair
Total markdown $ = $25 markdown x 50 pieces
Total markdown $ = $1,250
A collection of twill pants with an original retail price of
$100 was promoted for 25% off. There was a coupon in
the circular for an additional 20% off. What is the total
markdown if 200 pants were sold?
MARKDOWNS

Solution:
First Markdown on Group
Original retail price $100
– First percent off markdown (25%) – $25
New retail price = $75
– Second percent off markdown (20%) – $15
= New retail price = $60
Total markdown = $25 + $15 = $40 × 200 Units sold = $8,000.00
MARKDOWNS

Problem:
The sales in the men’s footwear department were planned
for $560,000, and the markdown percentage was planned
at 35%. Find the dollar amount of markdowns that would
be permitted.
Solution
Total planned markdown $ = $560,000 net sales x 35%
Planned markdown %
Total planned markdown $ = $196,000
GROSS MARGIN PERCENT

• Major indicator of company’s health = the profit remaining after


costs of goods sold are subtracted from sales
• Showing seasonal and yearly improvement is a critical success
factor for every buyer
• Gross margin % = Gross Margin Dollars/Net Sales X 100
For the first quarter, the junior sportswear department had the following gross margin
figures with a cumulative markup of 55.0%. Calculate the Gross Margin %.

Sales Gross Margin $


February $12,000 $6,000
March $10,000 $4,500
April $9,000 $4,000
WHAT IS THE DIFFERENCE BETWEEN GROSS
MARGIN AND GROSS PROFIT?
• Gross margin is the amount or percent before subtracting the selling, general and
administrative, and interest expenses.
• Profit margin is the amount or percent after the selling, general and administrative, and
interest expenses are subtracted. For example, a chain of grocery stores many have a
gross margin of 20%, but its profit margin may be 1% (of net sales).

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