Download SEM I 4.03 Notes

SEM I 4.03 Notes
COMPETENCY:
4.00
Develop customer service skills needed in the sports and entertainment
industry.
OBJECTIVE:
4.03
Solve related mathematical problems
A. Understand the cash drawer.
1. Opening cash fund
a. The opening cash drawer contains the coins and currency for the day’s business.
b. If there is more than planned in drawer, the till is over.
c. If there is less than planned, the till is short.
d. Report discrepancies to supervisor.
2. Balancing the cash drawer
a. At end of shift, the drawer must be balanced.
b. The money must be counted and a balance report filled out.
B. Complete a sales transaction.
1. The extension is the result of multiplying the number of units by the cost per unit.
2. Add item amounts.
3. Calculate sales tax and total.
C. Identify types of retail sales.
1. Cash sales include cash or checks.
2. Debit cards are bankcards or automatic teller machine (ATM) cards used to make a purchase
in the same way a credit card is used, except the funds are withdrawn from the customers
checking account.
3. Visa, MasterCard, American Express, Discover are examples of credit cards used in credit
sales.
D. Explain cost of merchandise sold.
1. The cost of merchandise sold is the amount a retailer actually pays for merchandise. The cost
of merchandise sold is determined by quoted wholesale cost, discounts, and transportation
charges.
2. One of the major expenses for wholesalers and retailers is the cost of merchandise purchased
for resale.
3. Factors affecting the cost of merchandise should be negotiated whenever possible. These
factors include:
a. Cost. Cost may not be “negotiable.” However, when combined with available discounts
and terms, the quoted cost is rarely the amount paid by the retailer for the merchandise.
b. Discounts. A reduction in the selling price offered by manufacturers and distributors to their
customers to encourage prompt payment and stimulate purchasing.
c. Allowances. A manufacturer often gives free merchandise for large orders as a means of
goodwill and to encourage future purchases.
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E. Explain the difference between profit and markup.
1. Profit is the amount left from revenue (sales) after the costs of merchandise and expenses
have been paid. Expenses include such things as rent, utilities, and salaries.
2. Markup is the difference between retail price and cost. In order for a business to be profitable,
its markup must be high enough to cover expenses and maintain desired profit.
F. Explain and calculate gross and net profit.
1. Gross profit is a business’s income minus the cost of goods sold.
a. Income for is the total of all sales for the time period minus any sales returns and
allowances.
b. Cost of goods (merchandise) sold is the actual amount paid to the vendors for the
merchandise.
2. Net profit is what is left after all expenses have been paid by the business.
G. Explain basic markup calculations.
1. Calculate retail price. The most basic pricing formula is the one for calculating retail price
when given cost and dollar markup.
RETAIL PRICE (RP)
$500
RETAIL PRICE (RP)
$500
=
=
=
=
COST (C) +
$300
COST (C) /
$300
MARKUP (MU)
+
$200
1-
MARKUP (MU) %
/
1-
40%
2. Calculate cost and markup: Formulas for cost and markup can easily be derived from the
formula, RP = C + MU.
C = RP – MU
$300 = $500 - $200
MU = RP – C
$200 = $500 - $300
3. Calculate markup percentage.
a. Markup percentage based on retail. To determine markup percentage, divide dollar
markup by retail price.
MU% BASED ON RETAIL
40%
=
=
DOLLAR MU
$200
/
RP
/
$500
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b. Markup percentage based on cost. To determine markup percentage based on cost, divide
dollar markup by cost.
MU% BASED ON COST
66.67%
=
=
DOLLAR MU
$200
/
/
C
$300
H. Explain reductions in selling price.
1. Reasons for markdowns.
a. Buying errors. Wrong styles, color, sizes, materials, and/or quantities have been
purchased.
b. Pricing errors. Initial price may be set too high, leading customers to a lower priced
competitor.
c. Special sales. Regular stock may be marked down for a special sales event, or a retailer
may buy particular goods to sell at promotional prices.
2. Calculate markdowns.
a. Markdowns are the most common type of price change.
b. Markdowns are used as a tool to stimulate sales, dispose of slow moving/discontinued
merchandise, meet competitors’ prices and increase customer traffic.
MARKDOWN (MD)
$25
=
=
RETAIL PRICE X
$100
X
MD %
25%
3. Find markdown percentage.
a. Markdowns are expressed as a percentage of net sales and cannot be calculated until
merchandise is sold.
b. Markdown percentages are usually calculated for a specific period of time rather than on
individual items.
MD% =
1.8% =
DOLLAR MD
$10,000
/
/
NET SALES
$550,000
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