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Retail Math Essentials for Merchandising

The document outlines key retail and merchandising metrics including: - Profit drivers like net sales, gross margin, and operating income. - Formulas for calculating cost of goods sold, total cost of sales, markup percentage, and variance calculations. - Formulas for initial and maintained markup percentage, reductions percentage, and gross margin. - Key metrics for merchandise replenishment including maximum stock, reorder point quantity, open-to-buy, stock-to-sales ratio, and turnover.

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21 views2 pages

Retail Math Essentials for Merchandising

The document outlines key retail and merchandising metrics including: - Profit drivers like net sales, gross margin, and operating income. - Formulas for calculating cost of goods sold, total cost of sales, markup percentage, and variance calculations. - Formulas for initial and maintained markup percentage, reductions percentage, and gross margin. - Key metrics for merchandise replenishment including maximum stock, reorder point quantity, open-to-buy, stock-to-sales ratio, and turnover.

Uploaded by

skribblez9
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Retail / Merchandising Mathematics Quick Reference

PROFIT DRIVERS:
Net Sales = Gross Sales - Returns and Allowances
Gross Margin = Net Sales - Cost of Sales
Operating Income = Gross Margin - Operating Expense
Gross Cost of Sales = Opening Inventory + Purchases + Freight in - Closing Inventory
Total Cost of Sales = Gross Cost of Sales - Cash Discounts + Alteration Expenses

UNDERSTANDING MARKUP
Retail = Cost + Markup
Markup % = (Retail - Cost) / Retail x 100
Cost = Retail x (1 - Markup %)
Retail = Cost / (1 - Markup %)
Variance in Markup = Average Markup - Actual Markup
Variance in Cost = Average Cost - Actual Cost
Variance in Retail = Average Retail - Actual Retail
Net Profit + Operating Expense + Alteration Expense
- Cash Discount + Reductions
Initial Markup % =_____________________________________________
Net Sales + Reductions x 100

Initial Markup % =

Maintained Markup + Reductions


_________________________________

x 100

Net Sales + Reductions

Maintained Markup = Initial Markup % x (Net Sales + Reductions) - Reductions

Reductions % =

Initial markup % - Maintained Markup %


__________________________________

x 100

100 - Initial Markup %

Gross Margin = Maintained Markup - Alteration Expense + Cash Discount

MERCHANDISE REPLENISHMENT
ORDER SYSTEMS:
Maximum Stock =

(Average Weekly Sales x Number of Weeks' Sales Required x Seasonal


Index) + Re-order Point Quantity

Re-order Point
Quantity =

( (0.5 x Review Period) + Lead Time + Reserve ) x Average Weekly Sales


x Seasonal Index

Open-to-Buy = Maximum Stock - (Stock on hand + Stock on order)

Stock to Sales Ratio =

Inventory/Stock at a given time


__________________________________
Sales for the Period

Turnover =

Net Sales for Period


__________________________________
Avg Stock/Inventory for same period

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