3-29-11b

3-29-11b - BOM inventory January: $15,000 BOM inventory...

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Gross Margin Return on Inventory HUEC 3043
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GMROI All business want to know how much money they make on the investment in the business Retail is the same Previous measures of profitability we have used: Sales per Sq. Foot Sales per Hour Average Transaction
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GMROI Inventory is no exception Inventory is an investment of money into physical goods which will in turn provide a profit for the company Goal is maximize profit and minimize investment and/or costs
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GMROI Gross Margin Return on Inventory: Ratio of the $ amount of Gross Margin to the average cost of inventory over a specified period of time Tells us the efficiency of investments made into inventory Analyzes if the amount of $ invested into inventory creates enough gross margin to maintain profit levels
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Calculating GMROI GMROI = Gross Margin $ / Avg. Inventory at Cost Calculated over a set period of time By using book inventory can be calculated each month
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Calculating Average Inventory at Cost For a six month season;
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Unformatted text preview: BOM inventory January: $15,000 BOM inventory February: $ 24,000 BOM inventory March: $31,000 BOM inventory April: $19,000 BOM inventory May: $ 23,000 BOM inventory June: $17,000 EOM inventory June: $26,000 Calculating Average Inventory at Cost Add all the inventory amounts together and divide by the number of inventory amounts ($15,000 + $24,000 + $31,000 + $19,000 + $23,000 + $17,000+ $26,000) / 7 = $22,142.86 average amount of inventory on hand at any given time during this selling season Calculating GMROI Gross Margin: $350,000 $350,000 / $22,142.86 = $15.80 GMROI This means for ever $1 we invest into inventory we will make $15.80 in gross margin Let you know if inventory levels are being kept too high or low GMROI Great measure of productivity As a buyer, your job is to invest the companies money into inventory and ensure the company makes a profit based on your investments...
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3-29-11b - BOM inventory January: $15,000 BOM inventory...

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