Retail Op
OPIM340 Retail Operations
Assignment 1: Retail Valuation (45 points)
Due: start of class Lecture 2
1. How does the strategic profit model assist retailers in planning and evaluating their marketing and financial strategies? (Limit your answer to 3-4 sentences max) (3 points)
2. Explain inventory turnover? Why does a low inventory turnover indicate more risk than a high turnover? Why do different products have different benchmarks for inventory turnover? (3 points) Average Inventory at Cost is $1,000. Say you have gross profit margins of 20%. If you sell $5,000 per year of this product, you make 20% of that or $1,000 in gross profit. What is your GMROI? (1 point) What is your Inventory Turnover? (1 point) What are your Days Sales of Inventory (given your turnover, how many days of inventory do you hold on average) (1 point)
3. A retailer has yearly sales of $800,000. Inventory on January 1 is $300,000 (at cost). During the year, $600,000 of merchandise (at cost) is purchased. The ending inventory is $305,000 (at cost). Operating costs are $90,000. Calculate the cost of goods sold and net profit and set up a P&L statement. (3 points)
4. A computer retailer has net annual sales of $150,000 and average inventory at cost is $20,000. What is the annual sales-to-stock measure? (1 point) If the computer retailer has a gross margin percentage of 15, what is the gross margin return on investment (GMROI)? (1 point)
5. A large catalog retailer of fashion apparel reported $100,000,000 in revenues over the last year. On average, over the same year, the company had $5,000,000 worth of inventory in their warehouses. Assume that units in inventory are valued based on cost of goods sold (COGS) and that the retailer has a 100 percent markup on all products. The company uses a 40 percent per year cost of inventory. That is, for the hypothetical case that one item of $100 COGS would sit exactly one year in inventory, the company
Assignment 1: Retail Valuation (45 points)
Due: start of class Lecture 2
1. How does the strategic profit model assist retailers in planning and evaluating their marketing and financial strategies? (Limit your answer to 3-4 sentences max) (3 points)
2. Explain inventory turnover? Why does a low inventory turnover indicate more risk than a high turnover? Why do different products have different benchmarks for inventory turnover? (3 points) Average Inventory at Cost is $1,000. Say you have gross profit margins of 20%. If you sell $5,000 per year of this product, you make 20% of that or $1,000 in gross profit. What is your GMROI? (1 point) What is your Inventory Turnover? (1 point) What are your Days Sales of Inventory (given your turnover, how many days of inventory do you hold on average) (1 point)
3. A retailer has yearly sales of $800,000. Inventory on January 1 is $300,000 (at cost). During the year, $600,000 of merchandise (at cost) is purchased. The ending inventory is $305,000 (at cost). Operating costs are $90,000. Calculate the cost of goods sold and net profit and set up a P&L statement. (3 points)
4. A computer retailer has net annual sales of $150,000 and average inventory at cost is $20,000. What is the annual sales-to-stock measure? (1 point) If the computer retailer has a gross margin percentage of 15, what is the gross margin return on investment (GMROI)? (1 point)
5. A large catalog retailer of fashion apparel reported $100,000,000 in revenues over the last year. On average, over the same year, the company had $5,000,000 worth of inventory in their warehouses. Assume that units in inventory are valued based on cost of goods sold (COGS) and that the retailer has a 100 percent markup on all products. The company uses a 40 percent per year cost of inventory. That is, for the hypothetical case that one item of $100 COGS would sit exactly one year in inventory, the company