Chapter 4: Cost of Merchandise Sold

FOB Factory (FOB origin)

The buyer takes title to the merchandise at the point of shipment (Factory). The buyer pays all transportation charges and assumes all risks for the goods while they are in transit.

Extra Dating (X-Dating)

The cash discount period is extended for an additional number of days

Dating

The time limits that apply to paying for merchandise. Dating involves two different periods: (1) the last day on which the cash discount is allowed and (2) the last day for payment before the bill is considered overdue.

FOB Destination; Charges Reversed

The vendor owns the goods until they get to the buyer's designated point; however, the buyer pays the transportation charges.

FOB Destination

The vendor pays all transportation costs and owns the merchandise until it arrives at the place designated by the buyer. These terms can also be written as "FOB Store" or "FOB Buyer's Warehouse"

FOB Shipping (Consolidation) Point

The vendor pays any crating and other costs necessary for getting the goods to a point where they can be turned over to a transportation company. These terms can also be written as "FOB Consolidation Point." The retailer pays transportation costs from the shipping point to the store/distribution center.

Invoice

a bill that is enclosed with a shipment of merchandise or that is mailed by the seller to the buyer

Seasonal Discount

a discount given for purchasing goods out of season

Robinson-Patman Act

a federal ruling that regulates price discrimination in interstate commerce

Back Office

a firm that assists vendors with operations, logistics, warehousing, and customer service

Trade/Functional Discount

a percent reduction from list price that may be one or a series of discounts

Buying Allowance

a price reduction for buying merchandise during a specified period

Quantity/Patronage Discount

a reduction in cost that is based on the size of the order

Discount

a reduction in price allowed by the seller

Rebate

a refund of part of the cost of the merchandise

Slotting/Stocking/Introductory Allowance, or Street Money

allowance given for stocking a new product

COD

cash on delivery means that payment is due when buyer receives goods

Trade Allowance

compensation given for stocking or displaying merchandise

Vendor

individual or firm from whom retailers buy merchandise. Also called a resource or supplier

Net Payment Date

last day on which the buyer can pay for an invoice before it is considered overdue

Private-label goods

merchandise that carry the retailer's label and are sold exclusively by the retailer

Promotional Allowances

money given to compensate a retailer for the expense of promoting a product or brand

Net Terms

notation on invoice which indicates that a cash discount is not allowed

Allowance

reimbursement or compensation granted to the retailer by the seller in return for specific services, such as advertising or display. For example, the vendor may agree to an advertising allowance whereby the retailer and vendor split the cost of the advertisement

Wholesale Price

the amount the vendor charges for goods

Terms

the conditions of the discount including the cash discount and dating

Invoice Date

the date on the invoice, which usually is the date the merchandise is shipped

Discount Date

the last day on which the discount is allowed in the discount period

Advanced Dating ("As of" Dating)

the periods are calculated from some future stipulated time

Regular/Ordinary/Normal Dating

the periods are calculated from the date of the invoice

ROG Dating

the periods are calculated from the date the goods are received

Billed Cost/Gross Cost

the price shown on the vendor's invoice after deductions for trade and/or quantity discounts, but before cash discounts are taken

Net Cost

the resulting amount to be paid for merchandise after applying discounts and transportation charges to the billed price

Markdown Guarantees

An allowance offered by vendors to cover retailers' lost gross margin dollars resulting from retail price reductions

Factor

Financial intermediary that collects vendors' receivables from retailers

Cash Discount

A percent reduction in price allowed if the retailer pays for merchandise before some specified date; a price reduction allowed for prompt payment.

Damage Allowance

A price reduction for buying merchandise during a specified period

FOB (Free on Board)

A shipping term placed before a specific location, such as factory, origin, or store. That location is the point at which title (ownership) to the merchandise changes.

EOM Dating

The discount day is calculated from the end of the month. Invoices dated on or after the 26th are considered to be dated the first of the following month.

List Price

The manufacturer's suggested retail price. The price or dollar amount to which the trade discount is applied to obtain the billed cost.