Advanced Fashion: Standard 7

Merchandising Math

Created by: Kris Caldwell

Timpanogos High School

Types of Financial Records

• Ledger: A book or computer program containing ongoing accounts of a company

• Accounts: Records of debits (subtractions of money) and credits (additions of money)

Financial Records and Forms

Operating Statement: (also called an income statement) A summary of the financial results of the firm’s operations over a specified period of time.

Cost of Goods Sold (COGS): The dollar amount spent on goods that have been sold to customers during the period.

Gross Margin: The sum of money available to cover expenses and generate a profit. Figured: Total Sales – COGS= Gross Margin

Financial Records and Forms

• Net Profit: Resulting positive number after expenses have been deducted from the gross margin figure.

• Profit Margin: Ratio that measures profit as a percentage of net sales; return on sales (ROS)

Sample Basic Operating (Income Statement)

Operating Statement

Gross Sales xxxx Less Returns and allowances -xxx

NET SALES XXXX Cost of Goods Sold Beginning Inventory xxxx Purchases (includes shipping) + xxxx Cost of goods available to sell xxxx Less: Ending Inventory - xxxx

COST OF GOODS SOLD +XXXX

GROSS MARGIN XXXXX Less Operating Expenses: Selling Expenses xxxx Administrative Expenses xxxx General Expenses +xxx TOTAL EXPENSES -XXXXX NET PROFT (BEFORE TAXES) XXXXXX

Terms to know:

• Fixed costs: Overhead expenses that remain the same regardless of sales volume.

• Variable costs: Expenses that increase or decrease with the volume of sales or production.

• Odd-figure Pricing: The retail pricing of merchandise a few cents less than a dollar denomination.

• Loss leader: Low-priced articles on which stores make little or no profit because of lowering the price for promotional reasons.

Terms to know:• Initial markup: The difference between

merchandise cost and the selling price originally placed on merchandise.

• Keystone markup: Doubling the cost price to arrive at the retail price.

• Maintained markup: The difference between gross merchandise cost and the net selling price of merchandise; the initial markup minus all retail markdowns or other reductions

Markups• Markup: The amount added to

the cost of merchandise to determine the selling price.

• Calculating Markup: There are 2 methods for calculating markup; markup percent of cost (markup on cost) or markup percent of selling price (markup on retail). Both are based on percentage.

Markup Percent of Cost

Markup % of cost =

dollar markup costcost

(Dollar markup cost is retail price minus cost)

Markup Percent of Selling Price

Markup % of Selling Price =

Dollar markup selling price

Markdowns

• Markdown: The difference between the previously marked selling price of an item and the reduced selling price.

• Calculated as either a percent of the original ticketed price or a percent of the marked-down selling price.

Percent of the Original Ticketed Price

Ticket price x Markdown %= Markdown

Ticket price – Markdown = Selling Price

Percent of the Marked-Down Selling Price

Markdown percent on net sales= Total $ markdowns Total Net Sales