258 Ass10 F18 - This is mandatory assignment number 10 for Fashion retail management course PDF

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This is mandatory assignment number 10 for Fashion retail management course with professor Ian Mull at Central Michigan University. These are assigned once a week and help in studying for the exams....

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MACKENZIE ARTHUR

Cost of Merchandise

Sales and Expenses

Totals

Percentages

Income from Sales: Gross Sales

$ 3,041,367.00 $ 144,827.00

Returns and Allowances Net Sales

$ ___2,896,540_______ _

100%

Cost of Merchandise Sold: Opening Inventory Gross Purchases Returns and Allowances Net Purchases Inward Freight Total Merchandise Handled Closing Inventory Gross Cost of Merchandise Sold Cash Discounts Net Cost of Merchandise Sold Alteration Costs Total Costs of Goods

$ $ 1,905,110.00 $ 9,478.00 $ 1,895,632.00 $ 28,868.00

604,088.00

$ 1,924,500.00 $ 2,528,588.00 $ 619,768.00 $ 1,908,820.00 $ 75,310.00 $ 1,833,510.00 $ 14,483.00 $ 1,847,993.00 $ _1,048,547________

Gross Margin

_63.8_______% 36.20%

Operating Expenses : Administrative Occupancy Marketing Buying Selling Total Operating Expenses

$ $ $ $ $

861,973.00 139,034.00 579,683.00 112,965.00 251,999.00 $ 1,945,654.00

29.80% 4.80% 20% 3.90% 8.70% __67.17______ %

Net Profit/Loss

$

-897,107

-30.97%

X

Imagine you the owner of a boutique located in downtown Minneapolis. It is the end of your fiscal year and you are calculating the Net Profit from the last six months. Using the profit and loss statement for your boutique above, please fill in the highlighted cells and analyze the statement to answer a few questions below. First, however, in order to fill in the cells, you will need to do the following: Step 1 = Calculate your Net Sales. Gross Sales – Returns and Allowances Step 2 = Calculate your Total Cost of Goods %. Total Cost of Goods/Net Sales Step 3 = Calculate your Gross Margin. Net Sales – Total Cost of Goods Step 4 = Calculate your Total Operating Expenses %. Total Operating Expenses / Net Sales Step 5 = Lastly, calculate your Net Profit or Loss. Gross Margin – Total operating Expenses If you have a Net Profit, please type it in Green If you have a Net Loss, please type it in Red Once you’ve completed the steps above, please answer the following questions: 1. What is the difference between Gross Margin and Net Profit/Loss? The difference between gross margin and net profit/ loss Is that gross margin measures the amount of profit made before any cost of goods sold or any expenses that aren’t on a product are deducted. This revenue is the amount that goes over the cost of goods sold. Gross margin is found by subtracting the cost of goods sold from the revenue and dividing that by the revenue then multiplying by 100 to get a percentage. Net profit/loss determines the amount of profit made after all the different expenses were deducted. This is comparison of net profits and revenues that is shown as a percentage. It is calculated by taking the revenue and subtracting cost of goods sold, operating expenses, other expenses, taxes, and interest and then dividing it by the revenue and multiplying by 100. This net profit margin shows how much of all of the money that is made that is turned into a profit.

2. What are the five most important piece of information found in the Profit and Loss statement and why? The five most important pieces of information found in the profit and loss statement are: one is net sales, these show how much profit or loss you have made. This allows you to make a comparison to other periods and to compare it to your budget. This will help for you to know how much profit or loss you made so that you can compare it to other periods to see what the cause might be while giving the overall sales amount. The second most important piece of information is the total cost of goods. The total cost of goods helps a company to see where they are spending their money and exactly how much they are spending on materials and other items involved in producing their products. By tracking this it helps a company to improve their profit because they can assess the company’s financial standing and make adjustments based on what they find. The third most important piece of information is gross margin. This is because it shows the revenue that is made to show if you are pricing products correctly in order to make a good amount of sales revenue and shows if you are discounting your products too much. The gross margin shows a percentage that tells a company the amount they are retaining on each sales dollar. The fourth most important piece of information is total operating expenses. Total operating expenses shows exactly how much it costs to operate and run your business. This will show you if expenses are rising faster than gross profit which tells you if you should lower costs or make more sales. The fifth most important piece of information is Net Profit/Loss. This is because they help a company to understand the amount of money they are making or losing throughout the year. This shows a company’s strength or weakness to make a profit and be successful. This helps them with their decision making when it comes to how they decide to run their business in the future. All of these are very important because they offer

insight on what the problem areas are for the company. Things can be found out about loss of customers, increase in sales, where your products are and aren’t selling, etc. so that in the future you can keep the company moving in an upwards direction and change anything that is bringing the company down. These all allow the company to assess themselves and compare from year to year how things are changing and if they are becoming more successful as a company. 3. Based on whether you found a Net Profit or Net Loss, what would some suggestions for your company be to improve your bottom line? Are there any areas where finances can be saved? Justify your analysis with concepts found in chapter 14 & 15. Due to the fact that I found a net loss I would suggest that our company makes some changes in order to improve our bottom line. First, I would switch my spending in the category of marketing. We spent $579,683.00 in marketing over the year and that number is a lot larger than what we spent in things like occupancy, buying, and selling. In order to cut back spending in the category of marketing I would suggest that our company begins to look at some new ways to effectively perform marketing that doesn’t require as much money. To do this we could start using more free advertising such as giving away free company branded items so that people are promoting our products for us and it is much cheaper for us to run. We also could start to use social media more things like Instagram, twitter, and Facebook because they are free of cost and customers are constantly using social media so this would actually be more effective to reach our target market. If we felt the need to cut more costs in order to improve our bottom line, we also could reduce spending in the administrative category. Administrative costs can be eliminated without having to change quantity of products in the store or how many we are producing and so this is also a good area to make financial budget cuts in. The administrative

expenses are related to the whole company as a whole not just specific departments so things like salaries of employees are included in this. To cut back administrative fees we could cut back workers or salaries of the employees in order to help the company improve from the bottom line. Both of these are great options for improving a company’s bottom line and will help them save their finances....