FMM 225 Module Two Merchandising for a Profit (1)

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Southern New Hampshire University *

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225

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Finance

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Jan 9, 2024

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Module Two: Merchandising for a Profit I. DEFINING THE BASIC PROFIT FACTORS A. ELEMENTS OF BASIC PROFIT FACTORS 1. OPERATING INCOME: SALES a. Gross Sales Quantity Price Total Item A 0 Item B 0 Item C 0 Gross Sales 0 b. Customer Returns and Allowances Total Total Total Quantity Price Time PD 1 Quantity Price Time PD 2 Returns + Return A 0 0 Return B 0 0 Return C 0 0 Allowance A 0 0 Allowance B 0 0 Allowance C 0 0 Total 0 0 0 Customer returns and allowances % Total returns Allowances Gross sales Returns allowances % #DIV/0! Gross sales Returns/allowances Net sales 0 Dept Net Sales as a % of total store sales Net sales Customer returns and allowances % Gross sales % 0 2. COST OF MERCHANDISE SOLD Billed cost Inward transportation Workroom costs Cash discount Total cost of merchandise 0 3. GROSS MARGIN Net sales Total cost of goods sold Gross margin 0 Direct expenses c. Net Sales 4. OPERATING EXPENSES

Indirect expenses Total $ operating expenses 0 Operating expense $ Net sales $ Operating expenses % #DIV/0! 5. OPERATING NET PROFIT Net sales Cost of merchandise sold Operating expenses Profit 0

Allowances

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Module Two: Merchandising for a Profit Operating Income (Gross Sales and Net Sales) Customer returns and allowances $5,500 Gross sales $100,000 Return Percentage 5.5% Gross sales $ $1,150,000 Reductions $ $345,000 Net sales $ $805,000 a. The dollar amount of reductions b. The net sales Gross Sales $248,000 Reduction % 20% Dollar amount of reductions $49,600 Net sales men's store $198,400 LY % TY Loungeware net sales $649,903.36 89.5% $764,372.70 Customer returns $76,245.65 10.5% $71,007.30 Loungewear gross sales $726,149.00 100.0% $835,380.00 Total store sales $3,500,000 1. Return Percentages: Customer returns and allowances for Department #620 came to $5,500. Gross sales in the department were $100,000. What percentage of merchandise sold was returned? 2. Net Sales $: If gross sales for Store A are $1,150,000 and reductions are $345,000, what are the net sales? 3. Men's Store: If gross sales for Main Street Men's Store were $248,000 and the reduction % was 20%, calculate the following: 4. Loungewear Department: After Mother's Day this year, the loungewear department had customer returns of 8.5%. The department's gross sales amounted to $835,380. As the buyer reviewed last year’s figures for the same period, the customer returns were 10.5%, with gross sales of $726,149. Compute the department’s performance in dollars and percentages for this year and last year, with regard to gross sales, customer returns, and net sales. 5. Towel Department Net Sales: The towel department represents 2% of total store sales, which are $3,500,000. What are the net sales planned for the towel department?

% to total 2.0% Towel department net sales $70,000 Casual Sneakers Total store sales $960,000 $960,000 % to total 4.5% 8.2% Sneakers/shoes net sales $43,200 $78,720 Cost of Goods Sold Practice Problems 150 sweaters with a billed cost of $7.75 each 175 knit tops with a billed cost of $4.50 each 250 leggings with a billed cost of $5.25 each Calculate the total billed cost for this order. # Units Billed cost Total costs Sweaters 150 $7.75 $1,162.50 Knit Tops 175 $4.50 $787.50 Leggings 250 $5.25 $1,312.50 Total $3,262.50 Billed cost Shipping Workroom costs Total Cost of Merchandise $59,000 $650 $575 Gross Margin Practice Problems Net sales = $149,000 Billed cost of merchandise = $84,250 Cost discount=6.5% Shipping charges = $840 Billed Cost Cost Discount % Cost Discount $ COGS $84,250 6.50% $5,476 Net sales $149,000 COGS $79,614 Gross Margin Total Cost and Percentage $69,386 46.6% 6. Shoes/Sneakers Net Sales: Casual sneaker sales represent 4.5% and athletic shoe sales represent 8.2% of total store sales. If total store sales are $960,000, what are the dollar sales for each department? Athletic Shoes 7. Total Billed Cost: The girls’ buyer placed an order for the following merchandise: 8. Total Cost of Merchandise: A gift shop has workroom costs of $575. The billed cost of merchandise sold amounted to $59,000, with cash discounts earned of $1,180 and freight charges of $650. Find the total cost of the merchandise. 9. Gross Margin: Calculate the gross margin in dollars and percentage for the home department if:

Operating Expense Practice Problems TY Plan LY Net sales $485,000 $520,000 $450,000 Advertising costs $82,000 $85,000 $86,000 Salaries $94,000 $90,000 $91,000 Find the following: TY Plan LY Advertising costs $82,000 $85,000 $86,000 Salaries $94,000 $90,000 $91,000 Total expenses $176,000 $175,000 $177,000 Total net sales $485,000 $520,000 $450,000 Expense % 36.3% 33.7% 39.3% TY Plan LY Net sales $485,000 $520,000 $450,000 Build TY vs. Plan -6.7% Build TY vs. LY 7.8% Skeletal Profit and Loss Statements Net sales $1,390,000 Gross margin $574,700 Profit $105,000 $ % Net Sales Problem One $1,390,000 100.0% -COGS $815,300 58.7% =GM $574,700 41.3% -Expenses $469,700 33.8% =Profit/Loss $105,000 7.6% Gross margin $535,000 Gross margin 25% Expenses $625,000 Net Sales Problem Two $2,140,000 100.0% -COGS $1,605,000 75.0% =GM $535,000 25.0% -Expenses $625,000 29.2% =Profit/Loss ($90,000) -4.2% 10. Total Expenses and Comparison of Sales: Analyze the following information: a. What are the total expenses in $ and % for TY, Plan, and LY? b. What is the comparison (build) of sales for TY versus Plan and TY versus LY? 11. Skeletal Profit and Loss Statement: Set up skeletal profit and loss statement in both dollars and percentage given the information.

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