Merchandising Ch. 14 & 15

Extra Dating Terms

"2/10 net 30 60X" - the buyer would have 10 days from the invoice plus an additional 60 days to take advantage of a 2% discount

EOM

"2/10 net 30 EOM" - 2% discount will be granted if the buyer pays the invoice within 10 days of the end of month in which the invoice is written.

ROG Dating terms

"2/10 net 30 ROG" - 2% discount will be granted if the buyer pays the invoice within 10 Days of the receipt goods

Advance Dating Terms

"2/10 net 30 as of May 1" - the buyer would have 10 days from the date given (may 1st) to take advantage of a 2% discount.

If the markup based on cost is 55.0% and the cost of an item is $8.00, what is its retail price?

$12.40

What would a retailer owe on a purchase with a list price of $100.00 from a wholesaler that grants a trade discount of 30.0% and 20.0%?

$56.00

Initial Markup Percentage

(Expenses + Profit + Reduction - Cash Discounts)/(Sales+Reductions)

Negotiating Terms of the Sale

-Price -Discounts -Transportation -Allowances -Return Privilages

Discountrs

-Quantity -Seasonal -Trade Discounts -Cash Discounts

Retailers use off-retail percentages for:

Advertising purposes

Assume that the invoice date is April 2, and the delivery date is April 5. What is the discount date if the terms are 2/10 net 30 ROG?

April 15

What is a fixed expense? Give 2 examples.

Fixed expenses do not vary regardless of how much merch. is sold. Ex: mortgage, rent, insurance payments, etc.

Which of the following describes keystoning?

The store doubles the cost

What is a markdown cancellation?

A markdown cancellation is canceling a markdown (marking the price back up to its original retail price) after a sale or promotion such as Black Friday or a Labor Day Sale.

Which type of discount is granted by the manufacturer when a retailer pays a bill before it is due?

Cash

All of the following retailers feature off-price merchandise EXCEPT:

Dillard's

Which one of the following cash discount terms is calculated from the last day of the month?

EOM

With which one of these transportation terms does the manufacturer pay the shipping charges?

FOB store

Trade Discounts

Manufacturers may quote discounts as a sales of discounts.

Name 4 of the 5 factors that affect retail price.

Merchandise/prices offered, vendor's distribution policies, vendor's reputation/reliability, terms offered, services offered.

Which of the following expenses is most likely to be a fixed expense?

Mortgage payment -advertising,payroll, and utilities are not

Name parts of a purchase order (P.O.)

Name/address of store, date, vendor name/address, delivery destination, terms of sale, cancellation date, dept. and classification no., description of merch. including qty./price, signatures, special instructions

What is odd-cent pricing?

Odd-cent pricing attempts to influence customer's perceptions of the retail price by ending it with certain numbers. Ex: $9.99 instead of $10.00

Describe off-price buying, and give 2 store examples.

Off-price occurs when retailers purchase manufacturer overruns at deep discounts for the purpose of offering consumers low prices on name brand merchandise. Ex: T.J. Maxx, Burlington Coat Factory, Ross, Marshalls, etc.

With which one of these terms does the retailer pay for merchandise that is delivered with the opportunity to return unsold products for a refund?

On memorandum

Which one of the following cash discount terms is calculated from the invoice date?

Ordinary

Cash Discounts

Ordinary Dating Terms

Specification Buying

Rather than developing private brands, some buyers may become involved in specification buying, where they may suggest specifications or changes that upgrade the quality of the merchandise, its workmanship, or styling. Sometimes this involves no upgrades, but just changing the merch. to make it different from similar goods carried by the competition.

Markup Percentage

Retail Price= Cost+Markup Cost=Retail Price-Markup Markup=Price-Markup Markup= Markup in Dollars/Retail Price

What is the formula for calculating merchandise cost?

Retail price - Markup

Quantity Discount

Save money in handling and processing orders in large quantities.

What is shrinkage? Give 2 examples.

Shrinkage includes reductions in inventory not accounted for by sales. Ex: employee theft, shoplifting, damaged/broken/defective merchandise.

Why would a retailer price ABOVE the competition, and how would this retailer be able to stay in business?

Some attempt to create a prestigious image by pricing above the competitor's prices, but customers need to perceive extra value for the higher prices. Usually, these retailers would offer free services such as delivery, alterations, personal shopping, exclusive merchandise, higher-quality merchandise, and better customer service.

FOB Destination (store)

This term indicates that the manufacturer pays the shipping charges, and the title passes to the buyer when the merchandise is delivered to the retail store. For a buyer, FOB destination terms are ideal.

What is a trade discount and how would you calculate an item offered with discounts of 40 percent and 10 percent?

Trade discounts are a series of discounts. You would first calculate the 40% discount, then take an additional 10% discount after that.

What are variable expenses? Give 3 examples.

Variable expenses change in a direct relationship to sales. They normally increase/decrease depending on the increase/decrease of sales. Ex: commissions, delivery expenses, supplies, advertising, etc.

. Terms like 2/10 net 30 mean that the retailer will:

be given a 2.0% discount if the bill is paid within 10 days of the invoice

Markdown cancellations occur at the beginning of a temporary sale, such as a Memorial Day Sale.

false

Retailers usually apply the same markup to all products carried in the store.

false

Anticipation is usually taken by retails when they:

have cash readily available

Seasonal Discounts

manufacturers are able to plan their production schedules more efficiently and keep skilled employees working throughout the year.

All of the following would be considered reductions

markdowns, employee discounts, shortages Cash Discounts are not considered reducttions

It costs Nordstrom much less to operate a Nordstrom Rack store than a traditional Nordstrom department store.

true

Markdowns taken early in the selling season tend to be smaller than markdowns taken at the end of the selling season.

true