UNIT E SELLING FASHION 5.03 Perform various mathematical calculations in retail sales.

UNIT ESELLING FASHION

5.03 Perform various mathematical calculations

in retail sales.

Calculate Basic Math

• Convert fractions to percents.– Divide the numerator of the

fraction by the denominator.– Example: ½ = 1 ÷ 2 = .50 = 50%

Calculate Basic Math (cont.)

• Convert percents to decimals. – Move the decimal point two

places to the left.– Example: 60% = .60

Calculate Basic Math (cont.)

• Convert decimals to percents. – Move the decimal point two places

to the right.– Example: .63 = 63%

Steps Necessary to Open and Close a Cash Drawer

1. Verify the opening change fund to determine that the amount of money actually provided for the cash till at the beginning of the day is equal to the amount designated for the given day’s activity.• Change fund: Coins and currency

designated for use in opening the register for a given day’s activity.

• Till: The cash drawer of a cash register.

1. Verify the change fund (cont.)

Before making any sales for the day…

• Count the change fund.

• Compare the actual change fund with the amount designated for the day.

• Follow company procedures to record the result and to correct any difference before making sales.

Steps Necessary to Open and Close a Cash Drawer

(cont.)

2. Balance the cash drawer.• Complete this process at the end of

the day.• Count the cash (including checks)

actually in the drawer.• Complete a closing balance report.

• Opening change fund plus cash received from sales minus cash paid out should equal actual cash in the drawer at the end of the day.

• Differences are recorded as cash short or cash over on the balance report.

Math for Cash Sales Transactions

1. Determine the total due from the customer.

• Add the retail price for each item purchased to determine a subtotal.

• Calculate sales tax and add to subtotal.• Sales tax: A government fee,

usually a percentage of the total sale, which is added to the retail price of goods paid by the final user.

Math for Cash Sales Transactions (cont.)

1. Determine the total due from the customer. (cont.)

• Formulas• Subtotal of purchase X Sales tax

rate = Total sales tax• Subtotal of purchase + Total

sales tax = Amount due from the customer


2. Announce the amount of the sale.

3. Announce the amount the customer submits for payment (also referred to as the amount tendered).


4. Make change as necessary. • If cash register calculates and

displays the amount of change to be given to customer, the amount of purchase and the amount tendered by the customer are stated and then change displayed by the register is counted back to customer beginning with the largest denomination.


4. Make change as necessary. • If older registers (or no registers at

all) are used, the amount of purchase is stated, and change is returned and counted up to the amount tendered by customer beginning with the smallest denomination.

• Always place the money received from the customer on the cash drawer ledge until the transaction is completed.


4. Make change as necessary. (cont.)

• Count change silently to yourself as you remove it from the till.

• Using the automatic method (when cash register computes and displays the amount to be returned), count change silently to yourself beginning with the largest bill and counting up to the amount of the change to be returned.


4. Make change as necessary. (cont.) • Using the manual method (when

the cash register used does not automatically compute and display the amount to be returned), count change silently to yourself beginning with the smallest coin and counting from the total amount of the sale up to the amount tendered by the customer.


4. Make change as necessary. (cont.)

• Count change back to the customer using the same method used in counting from the till.

• Place the money from the cash drawer ledge into the till.

Retail Sales Terms

• Cost (Cost of merchandise sold): The amount a retailer pays the supplier for an item for resale.– Reflects wholesale price, vendor

discounts/allowances, and transportation charges

– Represents a major outlay of money for the retailer

Retail Sales Terms (cont.)

• Employee discount: A set reduction in retail price given to employees at the time of a sales transaction.– Discounts entice employees to

buy the product they sell.– Typical discounts granted to

entry-level employees range from 10% to 30%.


• Extension: The result of multiplying the number of units by the cost per unit.

• Final selling price: The price at which merchandise ultimately sells after all markups and/or markdowns are taken.


• Gross profit: Sales revenue minus cost of merchandise sold.

• Gross sales: Total revenue from sales before considering returns, allowances, or adjustments.


• Initial markup: The difference between merchandise cost and the selling price originally placed on the merchandise.

• Keystone markup: A markup equal to the cost of the merchandise.

• Keystoning: Doubling the cost of the merchandise to arrive at the retail price.


• Maintained markup: The difference between the total cost of the merchandise and its final selling price. – Must be high enough to cover expenses and

desired profit if the business is to be successful

• Markdown: A strategy used to stimulate sales, dispose of slow moving/discontinued merchandise, meet competitors’ prices, and increase customer traffic.– The most common type of retail price change


• Markup: An amount added to the cost of goods to reach a selling price.

• Net profit: Gross profit minus total operating expenses.

• Net sales: The revenue generated from sales minus sales returns and allowances.

• Retail Price: The price the customer pays for the merchandise.

• Sales income: The revenue generated from sales minus sales returns and allowances.

Basic Markup Calculations

• When cost and dollar markup are known…Retail Price (RP) = Cost (C) + Markup (MU)

• Example: Retail Price (RP)=$55.00 (C) + $45.00 (MU)

Retail Price (RP) = $100.00

Basic Markup Calculations (cont.)

• When retail price and markup are known…Cost (C) = Retail Price (RP) – Markup (MU)

Example: Cost (C) = $100.00 (RP) - $45.00 (MU)

Cost (C) = $55.00


• When retail price and cost are known…

Markup (MU) = Retail Price (RP) – Cost (C)

• Example: Markup (MU) = $100.00 (RP) - $55.00 (C)

Markup (MU) = $45.00


• Markup percent based on retail price– Used by most department and fashion

specialty stores– Markup % (MU%) = Markup (MU) ÷

Retail Price (RP)

• Example: Markup % (MU%) = [$200 (RP) - $105 (C)]

÷$200 (RP)Markup % (MU%) = $95 (MU) ÷ $200 (RP)

Markup % (MU%) = .475 or 47.5%


• Markup percent based on cost– Used by some small businesses– Markup % (MU%) = Markup (MU)

÷ Cost (C)

• Example:

Markup % (MU%) = [$210 (RP) - $120 (C)]

÷$120 (C)

Markup % (MU%) = $90 (MU) ÷ $120 (C)

Markup % (MU%) = .75 or 75%

Reasons for Marking Down Retail Price

– Buying errors

– Pricing errors

– Special sales

– Broken assortments

– Reduction of goods in stock

Calculate Markdown

Markdown (MD) = Retail Price (RP) X

Markdown percentage (MD%)

• Example:

Markdown (MD)=$195.00 (RP) X 30% (MD%)

Markdown (MD) = $58.50

Calculate Markdown (cont.)

• The “New” Retail Price (after a markdown is taken) = Original retail price (RP) – Markdown (MD)

Example:“New” Retail Price (RP) = $195 (RP) -

$58.50 (MD)“New” Retail Price (RP) = $136.50

Markdown Percentage • Usually calculated for a specific period of

time• Expressed as a percentage of net sales,

which cannot be calculated until the merchandise is sold

• Used in planning and forecasting

Markdown % (MD%) = Dollar Markdown (DMD) ÷ Net Sales (NS)

Example:

Markdown % (MD%) = $10,000 (DMD) ÷ $550,000 (NS)

Markdown % = .01818 or 1.8%

UNIT E SELLING FASHION 5.03 Perform various mathematical calculations in retail sales.

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