1243016091_Chap013(2) - 13-1ShrinkageInventory loss caused...

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Unformatted text preview: 13-1ShrinkageInventory loss caused by shoplifting, employee theft, merchandise being misplaced or damaged and poor bookkeeping.Retailers measure shrinkage by taking the difference between1.The inventory recorded value based on merchandise bought and received2.The physical inventory actually in stores and distribution centersShrinkage % = $ shrinkage$ net sales13-2Monthly Reductions(Line 4)Reduction % Distribution 3. Month %6 mo. data AprilMayJune July Aug Sept100.00% 40.00%14.00% 16.00% 12.00% 10.00% 8.00% 4. mo. reductions$16,500 $6,600 $2,310 $2,640 $1,980 $1,650 $1,320Monthly Reductions = Total reductions x Monthly reduction %13-3Beginning of Month (BOM) Stock-to-Sales Ratio (Line 5)5. BOM Stock to Sales Ratio6 mo. data April May June July Aug Sept4.0 3.6 4.4 4.4 4.0 3.6 4.0Stock-to-Sales Ratiospecifiesthe amount of inventory (in retail dollars) that should be on hand at the beginning of the month to support the sales forecast and maintain the inventory turnover objective for the category Retails often use a related measure, Weeks of Inventory13-4Steps in Determining the Stock-to-Sales Ratio Step 1: Calculate Sales-to-Stock RatioGMROI = Gross margin% x Sales-to-stock ratioSales-to-Stock Ratio = GMROI/Gross margin %Assume that the buyers target GMROI for the category is 123%, and the buyer feels the category will produce a gross margin of 45%.Sales-to-Stock Ratio = 123/45 = 2.7313-5Steps in Determining the Stock-to-Sales Ratio ContinuedStep 2: Convert the Sales-to-Stock Ratio to Inventory TurnoverInventory Turnover = Sales-to-stock ratio x (1 GM%/100)Inventory Turnover =2.73 x (1 45/100) = 1.5013-6Steps in Determining the Stock-to-Sales Ratio ContinuedStep 3: Calculate Average Stock-to-Sales RatioAverage Stock-to-Sales Ratio= 6 months/Inventory turnover= 6/1.5 = 413-7...
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This note was uploaded on 01/09/2010 for the course MKT 4324 taught by Professor Trappey during the Spring '09 term at National Taiwan University.

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1243016091_Chap013(2) - 13-1ShrinkageInventory loss caused...

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