Funeral Home Management - Lesson 3.3 Study Guide
Patterson Funeral Home purchases $22,000 worth of caskets from their vendor. They receive a bill that states 2/14/N/30. How much will they save if they pay the bill within 10 days? For what amount would they then write the check to the casket vendor?
$22,000 x .02 = $440.00 and $22,000 - $440 = $21,560 is the amount they would pay.
Patterson Funeral Home is adding a cremation merchandise display to their selection room. They are offered a price discount of 4% from the urn vendor if they purchase 20-29 urns and an 8% discount if they purchase 30 or more of the same urn. If Patterson Funeral Home purchases 25 urns at a standard cost of $75 each, how much will they pay per urn? What would the price-per-unit be if they purchase 40 urns?
($75 x $25 = $1,875 minus 4% or $1,875 x .04 = $75 discount. They would pay $1,875 - $75 discount or $1,800 even for 25 urns or $1,800/25 =) $72 per urn with the 4%S discount. (If they purchased 40 urns at $75 they would initially pay $3,000 minus an 8% discount (which would be $3,000 x .08 = $240) = $2,760 for 40 urns =) $69 per urn at an 8% discount.
Compare and contrast the Declining Price structure with the Modified Declining Price structure.
-Declining price structure - higher price items are given a lower mark up. -Modified Declining Price structures lowers the prices as well but the higher CVI is with higher priced merchandise.
What is a potential drawback of the Fixed Multiple pricing structure?
1.) No improvement in CVI, 2.) No incentive to buy higher priced merchandise.
What is meant on a invoice that says "3/15 N/45" as the terms of a credit sale?
3% discount if paid in 15 days and net bill must be paid in 45 days.
What is the purpose of a cash discount?
A discount from a quoted price used as an inducement for prompt payment of an invoice.
What is a quartile?
A division of the total into four intervals, each one representing one-fourth of the total.
What is itemization?
A method of price quotation by which each unit of service and/or merchandise is priced separately.
What is functional pricing?
A method of price quotation by which the charges are broken down into several major component parts, such as professional service, facilities, automobile, and merchandise.
Define bi-unit pricing.
A method of price quotation showing separately the price of the service to be rendered and the price of the casket.
Define the concept of unit pricing.
A method of price quotation which creates one total price package for both service and merchandise.
Define the concept of price determination.
A method used by management to establish the selling price for services and merchandise.
Define the Fixed Multiple pricing structure.
A price determination method whereby the casket cost is multiplied by a constant factor; aka straight line, balance line, times factor.
What is the definition of a Declining Price structure?
A price determination method whereby the casket wholesale cost is multiplied by a factor that decreases as the wholesale cost increases; i.e. cheaper units are marked up by a higher factor than more expensive units.
Define and describe the Graduated Recovery pricing structure.
A pricing method where the markup varies, generally increasing as the wholesale cost increases.
Define package pricing.
A pricing method which groups together selected services and/or merchandise.
How does the concept of consignment work
A trading arrangement in which a seller sends goods to a buyer or reseller who pays the seller only when the good are sold. The seller remains the owner of the goods until they are paid for in full, and, after a certain period, may take back the unsold goods.
How is median defined?
A value in an ordered set of values which represents the midpoint, whereby there are an equal number of values above and below the midpoint value.
What is a quantity discount?
An incentive offered to a buyer that results in a decreased cost per unit of goods or materials when purchased in greater numbers.
Which pricing structure generally creates the least favorable CVI?
Graduated Recovery pricing structure.
What is another term for the "average" and how is it figured?
Mean - The sum of a group of numbers divided by the number of units.
How is age of inventory defined?
Measures the average time required to sell inventory.
Which pricing structure generally creates the best CVI?
Modified Declining Price structure
By what other names is the Fixed Multiple pricing structure known?
Straight Line, Balance Line and Times Factor
What are the benefits to a funeral home that uses a consignment arrangement?
The Funeral Director does not pay for the merchandise until it is sold.
Define markup.
The difference between merchandise cost and selling price.
Define wholesale cost.
The list price a funeral home normally pays for a casket (or other merchandise) from the manufacturer.
What is the definition of sales frequency?
The number of sales of various products and/or services during a fixed period of time.
Define inventory turnover.
The number of times the average inventory has been sold or used up (i.e. turned over) during a period.
What is the mode?
The number that occurs most frequently in a listing of numbers.
How is Consumer Value Index figured?
The percentage derived by dividing the wholesale cost of the merchandise by the retail price of the merchandise.
What is meant by the term Economic Order Quantity?
The quantity to be purchased which minimizes total costs.
How is the Merchandise Value Ratio figured?
The relationship between the wholesale cost of the merchandise and the total cost (both services and merchandise) to the consumer.
What is a rebate?
The return of part of the original payment for some good or service or a partial refund.
What is the definition of inventory?
Those goods or stock of goods which are held for resale; aka Merchandise.
