UNIT FOUR-BALANCE BRINGS PROFIT

CHAPTERS 12,13 AND 14

STEP ONE-SOLVE AND PRACTICE

INTRODUCTION TO UNIT
In the workbook, Unit Three covered how to financially plan a business operation, and then backed up those skills with strategic planning tools in Unit Four. those skills are the ones
that help merchants stay on track with the plans. These tools are critical for merchants, because, even if the buyer knows how much to buy-or what markup to earn, there has to be
specific ways how to achieve those goals.
Actually building a successful business is no different than winning a football game. The idea in a football game is to get a touch down or field goal-to score some points, all with the
plan to win. But rarely do teams score points in just one way. A variety of plays are put into motion all with end result in mind: to cross the goal line, score points and win.
Merchants too set their sights to win and often do just as the football team does, with a variety of plays. When the season ends with profits-generally it is because there was a
balanced assortment, a steady flow of merchandises, minimal markdowns, good merchandising strategies-all supported by repeat, happy customers.
CHAPTER 12-OPEN TO BUY
The checks and balances set in place for the win are often referred to by some merchants as the control measures. The first of these measures is the Open-to-Buy. Already
introduced on the six-month merchandising plan, OTB is a control factor buyers rely on to keep their eyes on the purchase orders that are to be shipped, the markdowns that need to
be taken, and any sales shifts that may affect that the stocks in relationship to the plans already in place.
Not only will it keep a merchant on their plan, but it will also be the tool to let a merchant know if there are funds to access if a buying opportunity comes up for a new line, a vendors
sales promotion or even reorders. Conversely it is a tool that allows the buyer to work with vendors to shift delivery dates if sales are sluggish causing stocks to pile up and shut out
not only potential buying opportunities-but ongoing replenishment of basic merchandise.
The OTB report is a reporting mechanism that ties many systems together. Sometimes the buyer may be focused on only one or two months as they prepare for market, some will be
looking at the entire six months. It does not matter the length of time being addressed, the calculations will be the same-looking at the relationship of stock, sales, markdowns and
what is on order.

STEP ONE-SOLVE AND PRACTICE

Solve and Practice

Look at the example below
-Change the planned sales.
What happens?
-Change the EOM or the markdowns.
Again, what happens? As you can see any changes you make will automatically be extended correctly.
Now practice
Use the blank OTB template and put in any numbers you want, and see how they calculate.

Open to Buy Report

Example for review

Department Name

Special Notes

Department Number
Departmental MU%
August
Planned Sales
+ Planned Markdowns
+ Planned EOM Stock

$
$
$

September

20,000
2,500
28,000

$
$
$
$

- Planned BOM Stock

- On Order

$
$

October
28,000
2,500
34,000

50,500

24,000
4,000

$
$
$
$

$
$

29,800
500
45,000

64,500

28,000
4,000

$
$

75,300

34,000
12,000

= Open to Buy at Retail

$
$

28,000
22,500

$
$

32,000
32,500

$
$

46,000
29,300

Open to Buy at Cost

12,825

18,525

16,701

Open to Buy Report

Student Practice Template
Department Name

Special Notes

Department Number
Departmental MU%
Month

Month

Month

Planned Sales
+ Planned Markdowns
+ Planned EOM Stock
$

= Open to Buy at Retail

$
$

$
$

$
$

Open to Buy at Cost

- Planned BOM Stock

- On Order

STEP ONE-SOLVE AND PRACTICE

CHAPTER 13-CLASSIFICATION PLANS

Another key tool used to plan effectively is the classification plans that were covered in Chapter 13. There are many details found on classification reports that can help a buyer
build an assortment of merchandise for all customer taste and buying levels. Although this is not a weekly type of report, it is strategic at the onset of a season or as a means to
maintain stock levels of a classification of merchandise.
The spreadsheet template you will use to complete the problems on the CD will look like the following. Again, the formulas for this style of report have already been programmed in
and you can benefit by looking at how very large amounts of money can be representative of very small quantities per style, color or price.

Solve and Practice

Look at the example below
-Change the unit price.
What happens?
-Change the percent of stock for lower, upper and middle.
Again, what happens? As you can see any changes you make will automatically be extended correctly.
Now practice Use the blank template and put in any numbers and quantities you want. You can see how they calculate.

Classification Plan
Women's Shoes

August 1, 200_
BOM Stock: $40,000

General Breakdown:BOM Stock

$
40,000.00
Price Line
Lower
Middle
Upper

$
$
$

Example for review

% to Stock

25.00
40.00
65.00

Total Retail

30%
50%
20%
100%

Total

$
$
$
$

Retail Units

12,000.00
20,000.00
8,000.00
40,000.00

480
500
123
1103

Style Breakdown

Lower Price

Lower Price

Middle Price

Middle Price

Upper Price

Upper Price

Low Heel Sling Back

Low Heel Sandals
High Heel Sandals
Closed Flats
Closed Heels

Percent (%)
20%
30%
10%
40%
0%
100%

480
Pieces
96
144
48
192
0
480

Percent (%)
15%
15%
25%
25%
20%
100%

500
Pieces
75
75
125
125
100
500

Percent (%)
5%
15%
25%
35%
20%
100%

123
Pieces
6
18
31
43
25
123

Classification Plan
Women's Shoes
General Breakdown:BOM Stock

August 1, 200_
BOM Stock:
Student Practice Template

Price Line

Lower
Middle
Upper

$
$
$

% to Stock

0%
0%
0%
0%

Total
Style Breakdown

Total Retail

$
$
$
$

Retail Units

#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

Lower Price

Lower Price

Middle Price

Middle Price

Upper Price

Upper Price

Percent (%)
0%
0%
0%
0%
0%
0%

#DIV/0!
Pieces
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

Percent (%)
0%
0%
0%
0%
0%
0%

#DIV/0!
Pieces
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

Percent (%)
0%
0%
0%
0%
0%
0%

#DIV/0!
Pieces
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

CHAPTER 14-COST SHEETS

Building profitable lines of store-brand merchandise is a great way to eliminate the middleman and buyers across the country today are doing just that as a way to keep pricing down
and offer excluvice brand merchandise for their customers.

Working with Cost Sheets shows buyers how to to calculate how much it costs to actually make a product. That's right, not only do the private label firms design and develop their
own goods, but many of the large retailers today have separate divisions for product development, such as Federated with their division of the Federated Merchandising Group, who
create their own product lines and as you learned in the book, it is a tool buyers must know how to complete and evaluate in the job market today.
Yes, product development specialists are usually the key people responsible for completing Cost Sheets, but buyers must know how to read them and to use them. As an
information source they can help buyers shop the market for the best prices and the data also helps the buyer to price merchandise purchased as a private label or directly from a
manufacturer.
Take a look at the example, review your workbook and then, using the given data determine the cost of goods to be sold on the spreadsheet template.

STEP ONE-SOLVE AND PRACTICE

Solve and Practice

Look at the example below
-Change the yardage amount. Maybe change the price per yard.
What happens?
-Change the quantities?
Again, what happens?
Now practice
Use the blank Cost Sheet Template and put in any numbers you want.
Maybe you have some experience in design or sewing. You might want to calculate how much an item you
constructed if made in quantity. But remember, if you work with dozens or factions a you will have to convert those
amounts to the decimal equivalent (just as you did in Chapter 2) before the data can be entered .
For example you cannot enter 3/4 of a dozen. It must be .75
Or, you cannot enter 1/2 of something, you must write it as .5 or .50, because the spread sheet programs are set up
to work with decimals not fractions.

Cost Sheet

Example for review

Date____________

Style Number____________

Sketch and Fabric

Fabric Mill

North Caroling

Manufactured

Miami, Florida

Description

Size Range

s, m, l

Size Scale

1-3-2

Fabric Width

60 inches

Estimated Marker Yardage

14 yards

Actual Marker Yardage

Materials

Yardage

Price Per Yard

Total Amount

Fabric

2.00

4.00

Fabric

1.5

4.00

6.00

Lining
Total Cost of Materials
Trims

Amount

Cost Each

10.00

Total Cost

Buttons

0.18

1.08

Zippers

0.79

0.79

Belts

Other

0.5

1.45

0.73

Labor

Total Cost

Marking and Grading Costs

250.00

100

2.50

Cutting Costs

150.00

100

1.50

Construction Costs

2.00

2.00

Total Cost of Trims and Findings

Pcs per total cost

2.60

Total Per Piece

Total Labor Costs

6.00

Shipping and Duty Expenses

Total Cost

Number of pieces

Shipping Expenses

5.00

Import Duties

0.82

Total Per Piece

12
1

0.42

0.82
Total shipping and duty costs

5.82

Total Cost of Goods

24.42

Note: the wholesale price and the retail price can

*Suggested Wholesale

be determined by applying suggested industry markups

and utilizing the markup templates covered in Unit Two

*Suggested Retail

Cost Sheet

Student Practice Template

Date____________

Style Number____________

Sketch and Fabric

Fabric Mill
Manufactured

Description

Size Range
Size Scale

Fabric Width
Estimated Marker Yardage
Actual Marker Yardage
Materials

Yardage

Price Per Yard

Total Amount

Fabric

Fabric

Lining
Total Cost of Materials
Trims

Amount

Cost Each

Total Cost

Buttons

Zippers

Belts

Other

Labor

Total Cost

Marking and Grading Costs

#DIV/0!

Cutting Costs

#DIV/0!

Construction Costs

#DIV/0!

Total Cost of Trims and Findings

Pcs per total cost

Total Per Piece

Total Labor Costs

#DIV/0!

Shipping and Duty Expenses

Total Cost

Number of pieces

Shipping Expenses

Import Duties

Total Per Piece

0
0

#DIV/0!
#DIV/0!
Total shipping and duty costs
Total Cost of Goods

Note: the wholesale price and the retail price can

#DIV/0!

*Suggested Wholesale

be determined by applying suggested industry markups

and utilizing the markup templates covered in Unit Two

*Suggested Retail

Once you feel comfortable with the spreadsheets for these three chapters, move to the next file that
has problems for you to solve using these same templates.

nd then backed up those skills with strategic planning tools in Unit Four. those skills are the ones
nts, because, even if the buyer knows how much to buy-or what markup to earn, there has to be

The idea in a football game is to get a touch down or field goal-to score some points, all with the
put into motion all with end result in mind: to cross the goal line, score points and win.

with a variety of plays. When the season ends with profits-generally it is because there was a
erchandising strategies-all supported by repeat, happy customers.

chants as the control measures. The first of these measures is the Open-to-Buy. Already
on to keep their eyes on the purchase orders that are to be shipped, the markdowns that need to
ans already in place.

hant know if there are funds to access if a buying opportunity comes up for a new line, a vendors
ork with vendors to shift delivery dates if sales are sluggish causing stocks to pile up and shut out
dise.

mes the buyer may be focused on only one or two months as they prepare for market, some will be
ed, the calculations will be the same-looking at the relationship of stock, sales, markdowns and

middleman and buyers across the country today are doing just that as a way to keep pricing down

ctually make a product. That's right, not only do the private label firms design and develop their
t development, such as Federated with their division of the Federated Merchandising Group, who
st know how to complete and evaluate in the job market today.

mpleting Cost Sheets, but buyers must know how to read them and to use them. As an
data also helps the buyer to price merchandise purchased as a private label or directly from a

etermine the cost of goods to be sold on the spreadsheet template.