Retail Marketing Financial

868 Words Dec 8th, 2013 4 Pages
QUESTION # 1: A retailer has yearly sales of $650,000. Inventory on January 1 is $260,000 (at cost). During the year, $500,000 of merchandise (at cost) is purchased. The ending inventory is $275,000 (at cost). Operating costs are $90,000. a. Calculate the cost of goods sold b. Calculate the net profit

PART A: Cost of goods sold = = = = PART B: Net Profit = Gross Profit – Operating Expenses Cost of merchandise available for sale – cost value of ending inventory ($260,000 + $500,000) - $275,000 $760,000 - $275,000 $485,000

First you have to calculate the Gross Profit: Gross Profit = = = Sales – Cost of Goods Sold $650,000 - $485,000 (calculated in Part A) $165,000

Now, you can calculate the net profit: Net Profit = = $165,000 -
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------------------------------------------------------------------------------------------------------------------------------- ---------------Part C: Ending retail book value of inventory = on paper, how much is your inventory worth (at retail) = = Merchandise available for sale – Sales – Deductions $200,000 - $150,000 - $20,000 = $30,000

On paper, we show that we have $30,000 worth of inventory left at the store. ------------------------------------------------------------------------------------- ----------------------------------------------------------

Part D: Stock shortages = how much inventory was stolen/lost? = Ending retail book value of inventory – physical inventory at retail = $30,000 (calculated in Part C) - $10,000 (given in problem) = $20,000 (in stock shortages) ----------------------------------------------------------------------------------------------------------------------------- --------------------------Part E: Adjusted ending retail book value of inventory = adjusted the value of the retail book value of inventory to reflect the actual physical inventory on hand. This adjusts your books to match what you actually have at the store. = $10,000 (your physical inventory)

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