Analysis and Control

Question 1

What are some factors to consider when selecting vendors?

Answer 1

Merchandise, reliability of delivery, steady source of supply, markup, past history, vendor support, vendor distribution practices, amount of vendors, and vendor managed inventory

Question 3

What are advantages of having many vendors?

Answer 3

• Broader assortment of merchandise
• Changes from season to season
• Minimizes risk of supply interruption

Question 4

What are advantages of having few vendors?

Answer 4

• Easier to build good relationships
• Good for smaller retail stores
• Less time and effort
• Large orders can be placed (quantity discounts)
• Fewer shipping costs (merch from same location)

Question 5

What are the categories of vendors?

Answer 5

A-E

Question 6

What is the 80-20 principle?

Answer 6

20% of vendors generate 80% of sales, 80% generate 20% of sales.

Question 7

What classifies an A vendor?

Answer 7

A vendor that secures substantial sales and profitability

Question 8

What classifies a B vendor?

Answer 8

A vendor that generates satisfactory sales and profits

Question 9

What classifies a C vendor?

Answer 9

A vendor from which a retailer purchases a small amount

Question 10

What classifies a D vendor?

Answer 10

A vendor from whom the retailer would like to buy but the vendors do not currently sell to

Question 11

What classifies an E vendor?

Answer 11

A vendor with whom the retailer has an unproductive relationship

Question 12

What are the guidelines for profitable vendor relationships?

Answer 12

1. Avoid quick judgment.
2. Be aware of the profitability of each vendor.
3. Develop good relationships with the most important vendors.
4. Review the performance of all vendors on a regular basis.
5. Maintain written records on vendors.
6. Be available to see vendors.
7. Be aware of unexpected vendors can produce top-selling merch.
8. Know sales people and top management.
9. Before placing orders, check competition.
10. Before purchasing odd lots or seconds, be sure they fit the store’s image.
11. Do not make unreasonable demands.
12. Maintain an open door policy.

Question 13

How do you calculate sell through units?

Answer 13

Sell through = (# of items sold/# of items received) x 100

Question 14

How do you calculate sell through dollars?

Answer 14

Sell through = ($ sales /$ received) x 100

Question 15

What is an invoice?

Answer 15

The bill that is associated with the shipment of merchandise

Question 16

What is the billed cost?

Answer 16

The purchase price as it appears on the invoice

Question 17

Who usually pays transportation costs?

Answer 17

The retailer

Question 18

What does FOB stand for?

Answer 18

Free On Board

Question 19

What does FOB mean?

Answer 19

The point where ownership of the merchandise transfers, thus there is a shift in responsibility of shipping expenses

Question 20

What does FOB factory mean?

Answer 20

The retailer pays transportation costs from the moment the merchandise leaves the factory

Question 21

What does FOB destination mean?

Answer 21

The vendor pays transportation costs until the merchandise reaches the store.

Question 22

What are quantity discounts?

Answer 22

A reduction in price based on the quantity purchased

Question 23

What are seasonal discounts?

Answer 23

A reduction in price for orders placed in advance (or at the end) of the normal ordering period

Question 24

What do the terms of sale specify?

Answer 24

Agreement on shipping and transportation costs, payment arrangements, cash discounts, and other discounts.

Question 25

What does net 30 mean?

Answer 25

The buyer has thirty days from the date of the invoice to pay it in full.

Question 26

What does 2/10/N30 mean?

Answer 26

The buyer can get 2% off for ten days after the invoice. He or she has 30 days to pay the invoice in full.

Question 27

What does 8/10 EOM mean?

Answer 27

The buyer can get 8% cash discount until 10 days after the end of the month. The billing month usually begins five days before the end of the month.

Question 28

What does 2/10-60X mean?

Answer 28

The buyer can get a 2% cash discount until 70 days after the invoice.

Question 29

What does 2/10/N30 ROG mean?

Answer 29

The buyer’s payment cycle begins at the receipt of goods.

Question 30

What does 2/10/N30 as of May 1 mean?

Answer 30

The buyer has 10 days after the date noted to receive the cash discount

Question 31

What is penetration?

Answer 31

A measure of the performance of a single business unit as a percentage of the aggregate performance of all similar business units.

Question 32

What’s the difference between internal standards and industry standards?

Answer 32

Internal standards are derived from within an organization. Industry standards are derived from outside an organization.

Question 33

What is a deviation?

Answer 33

A discrepancy between actual performance and a standard.

Question 34

Why is it important to use multiple standards?

Answer 34

Multiple standards reveal problems veiled by single standards. Ex: a store is up 7% to plan, but the company is up 14% to plan.

Question 35

How do you determine percent deviation?

Answer 35

Percent of deviation = (amount of deviation/standard) x 100

Question 36

What is the difference between qualitative and quantitative controls?

Answer 36

Qualitative controls measure performance descriptively. Quantitative controls measure performance numerically.

Question 37

What is an exception report?

Answer 37

Includes only major deviations from standards. (+/-10%)

Question 38

What are the classifications of purchase orders?

Answer 38

1. Regular orders
2. Orders for new merchandise
3. Special orders (usually for just one item, i.e. a specific shoe size for a customer)
4. Advance orders
5. Reorders for fast selling merchandise

Question 39

What type of report was generated for Danielle’s Department Store?

Answer 39

An annual turnover report. Issues can be traced to sales and/or average inventory.

Question 40

What type of report was generated for Tie One On?

Answer 40

A monthly stock-to-sales ratio report. Penetration of inventory should closely match penetration of sales.

Question 41

What type of report was generated for Betty’s Boutique?

Answer 41

A vendor sales report. Report of sales by major vendor. Compares WTD, MTD, STD, and YTD.

Question 42

What type of report was generated for Steinert’s?

Answer 42

A sales by category report.