Chapter 5 Lecture 1 - Chapter 5 Lecture 1 - Merchandisers!...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 5 Lecture 1 - Merchandisers! Up to now, we have been discussing service businesses , 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 price. 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. My 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?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/10/2011 for the course ACCOUNTING 201 taught by Professor Notsure during the Spring '11 term at Edmonds Community College.

Page1 / 6

Chapter 5 Lecture 1 - Chapter 5 Lecture 1 - Merchandisers!...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online