Lecture 1 - Merchandisers!
Up to now, we have been discussing
, that is,
organizations that earn profits by doing something for their customers,
providing advice, talent, or whatever.
Service businesses have
relatively simple income statement and balance sheet structures.
Merchandisers are different.
A merchandising company earns a profit by
purchasing goods (inventory) at a relatively low cost from suppliers, and
then selling those same goods (inventory) to customers at a higher
Generally, merchandisers do very little to the actual inventory,
other than sort it, display it, or put price tags on it.
In Accounting 203,
Managerial Accounting, we will discuss manufacturers who take raw
materials, put them through a process, add labor and overhead to that
raw material, and produce finished goods to sell. Once we get through
this discussion of manufacturers, I know that you won't be able to sit still
until we get to deal with all those manufacturing inventory accounts in
203! But, first things first.
Merchandisers compete for customers using a variety of strategies,
such as your classical marketing mix,
the four “ P's," Product,
Promotion, Place and what is that fourth one? Oh yes, Price!
Merchandisers can choose to offer high quality, high- priced
merchandise and provide a great deal of service and personal selling to
move the merchandise. Or, merchandisers can choose to offer
inventory of a lower quality at a lower price, and minimize both service
and the selling effort.
These differences in marketing strategy will have
direct impacts on a company's income statement and balance sheet.
mother – in –law used to say,” buy something for $1.00 and sell it for .75
cents you will have lots of sales, but no profit. Buy something for $5.00
and sell it for $100 you will not have a lot of sales, but sell one and look
at all the profit?
Of course she was exaggerating, but she did have a point?