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Name____________________________
Chapter 9 Retailing
Multiple Choice
Identify the choice that best completes the statement or answers the question.
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1. Determine the buyer’s BOM for March, using the percentage variation method, based on the
following information: planned sales for March = $200,000; total spring sales = $600,000; spring
months = 4; inventory turnover = 2.5.
a. $150,000
b. $240,000
c. $260,000
d. $280,000
e. $600,000
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2. The _____ dollar inventory planning technique states that the percentage fluctuations in monthly
stock from average stock should be half as great as the percentage fluctuations in monthly sales
from average sales.
a. partial stock
b. stock-to-sales
c. basic stock
d. percentage variation
e. weeks’ supply
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3. Inventory planning based on the weeks’ supply method would be most appropriate for a _____,
where inventories are planned on a weekly basis and where sales do not fluctuate substantially.
a. supermarket
b. furniture store
c. department store
d. sporting goods store
e. campus bookstore
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4. The following information is known for a buyer of cosmetics:
Planned sales for the month
Planned EOM stock
Planned reductions
BOM inventory
Merchandise commitments for delivery
What is the cosmetic department’s open-to-buy at retail?
a. $10,000
b. $25,200
c. $32,400
d. $34,800
e. $38,600
$42,000
$60,000
$4,800
$72,000
$9,600
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5. The difference between a retailer’s planned purchases and the retailer’s open-to-buy is:
a. merchandise that the retailer has already ordered, but has not received.
b. the discounts offered by vendors on earlier purchases.
c. reductions to be taken later in the selling period.
d. the difference between the BOM and EOM stock levels.
e. A retailers planned purchases is always equal to the retailer’s open-to-buy.
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6. Planned purchases at retail are computed as follows:
a. planned sales plus planned reductions plus planned EOM stock minus planned
BOM stock.
b. planned sales minus planned reductions plus planned BOM stock plus planned
EOM stock.
c. planned sales plus planned reductions minus commitments for future delivery.
d. planned BOM stock plus planned sales plus planned reductions minus EOM
stock.
e. planned sales plus planned reductions plus planned EOM stock plus planned
BOM stock.
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7. The following planned figures have been developed by a buyer for next month: sales = $25,000;
reductions = $1,500; BOM stock = $80,000; EOM stock = $88,000; commitments already made for
delivery during next month = $5,600. What are planned purchases and OTB for the buyer?
a. $18,500; $12,900
b. $34,500; $40,100
c. $18,500; $24,100
d. $34,500; $28,900
e. $26,500; $18,500
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8. If a buyer lowers planned reductions by $7,000 for the month, this will:
a. reduce planned reductions for the following month by one half that amount;
$3,500.
b. reduce BOM inventory by $7,000.
c. lower this month’s OTB by $7,000.
d. raise planned purchases by $7,000 for this month.
e. raise this month’s OTB by $7,000.
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9. A $1,000 increase in planned reductions for the month would:
a. raise EOM inventory by $2,000.
b. lower this month’s OTB by $1,000.
c. increase BOM inventory by $1,000.
d. increase this month’s OTB by $1,000.
e. lower planned purchases by $1,000 for this month.
____ 10. Which of the following is NOT a common buying error that may cause adjustments to be made to
the retailer’s OTB?
a. Buying the wrong type of merchandise
b. Buying merchandise at the wrong price levels
c. Having too much or too little basic stock on hand
d. Buying from very few vendors
e. Failing to identify the season’s hot items early enough in the season
____ 11. The three dimensions of the optimal merchandise mix are:
a. breadth, depth, and concentration.
b. merchandise lines, breadth, and density.
c. variety, density, and merchandise lines.
d. breadth, consistency, and depth.
e. variety, breadth, and depth.
____ 12. _____ refers to the management of merchandise categories, or lines, rather than individual
products, as a strategic business unit.
a. Category management
b. Breadth management
c. Assortment management
d. Brand management
e. Merchandise management
____ 13. _____ refers to the number of merchandise brands that are found in a single merchandise line.
a. Choice
b. Variety
c. Assortment
d. Breadth
e. Depth
____ 14. When deciding on which products to stock, buyers encounter all of the following conflicts EXCEPT:
a. maintaining a strong in-stock position on genuinely new items while avoiding the
losers.
b. maintaining a high turnover goals at the same time you are maintaining a high
margin on all items in the store.
c. maintaining an adequate selection for customers while not confusing them.
d. maintaining space productivity and utilization while not congesting the store.
e. maintaining an adequate stock of the “basic” items while still keeping money aside
to capitalize on unforeseen opportunities.
____ 15. A vendor profitability analysis statement:
a. is a vendor’s financial statement that is made available to all retailers.
b. is a schedule maintained by the retailer which shows each vendor’s initial data for
new lines, shipment of orders, and gross margins.
c. is a retailer’s financial statement used by the vendor for determining available
credit limits.
d. is a retailer’s analysis of the profitability of the different vendors and their lines
from the prior year(s).
e. breaks down vendors using an A-B-C classification based on the reliability of
delivery from each vendor.
____ 16. Assume that the list price of an item is $1,200 and that the chain of discounts is 40-20-10. How
much would a retail buyer pay?
a. $480.00
b. $518.40
c. $576.00
d. $720.00
e. $840.60
____ 17. When a retailer makes a single purchase of 25 or more cases of wine, the vendor offers an extra 20
percent discount. This is an example of a:
a. noncumulative-quantity discount.
b. promotional allowance.
c. cash discount.
d. functional discount.
e. cumulative-quantity discount.
____ 18. A _____ discount is one that a vendor provides a retailer for running a special promotion for a
manufacturer.
a. promotional
b. advertising rebate
c. psychological
d. special
e. cash
____ 19. Ten days before Halloween, your local candy wholesaler puts all of its Halloween candy on sale.
This is an example of which type of discount?
a. Seasonal discount
b. Quantity discount
c. Zone pricing
d. Promotional allowance
e. Smart discount, since Valentine’s Day is approaching and the wholesaler does not
want to be stuck with the merchandise
____ 20. A cash discount is quoted to a retailer as 3/10, net 60. This means that:
a. a discount of 3 percent can be earned if paid off in 10 installments over the next
60 days.
b. the retailer will get a 10 percent discount if the total is paid in 60 days.
c. a 3 percent discount will be granted to the retailer if the bill is paid in 10 days.
d. the bill is due in 60 days, but a discount of 3 percent to 10 percent can be earned
for paying it off sooner.
e. the total bill must be paid within 10 days.
____ 21. A buyer is given cash discount terms of 3/10, net 30, MOM. The invoice for the goods is dated May
14. When will the discount period expire?
a. May 25
b. May 22
c. June 10
d. June 15
e. June 30
____ 22. _____ allows the retailer to pay the invoice in advance of the end of the cash period and earn an
extra discount.
a. Advance discount
b. Functional discount
c. Momentum discount
d. Promotional allowance
e. Anticipation
____ 23. If delivery terms are FOB factory, who would be responsible for the transportation charges?
a. The transportation company
b. The vendor
c. The buyer
d. The buyer and the vendor share the expenses
e. The final customer
____ 24. When a manufacturer quotes the same price for the same merchandise to buyers in Cleveland,
Ohio; Los Angeles, California; and Orlando, Florida the manufacturer is probably quoting the
retailers a _____ price.
a. zone
b. basing point
c. FOB destination
d. FOB equal
e. FOB shipping point
____ 25. _____ occurs when customers or individuals disguised as customers steal merchandise from the
retailer’s store.
a. Vendor collusion
b. Vendor theft
c. Shorting
d. Employee theft
e. Customer theft