Question 1

Inventory planning based on the weeks' supply method would be most appropriate for a _____,where inventories are planned on a weekly basis and where sales do not fluctuate substantially.

Accepted Answer

The weeks' supply method is most appropriate for a supermarket because supermarkets typically have steady, predictable sales and require weekly inventory planning to ensure freshness and availability of products. Other options like furniture stores, department stores, sporting goods stores, and campus bookstores may experience more significant fluctuations in sales or do not require as frequent inventory replenishment.

Question 2

Gross margin return on inventory (GMROI)equals:

Accepted Answer

GMROI is calculated by multiplying the gross margin percentage by the inventory turnover rate. The formula in option B is a variation of this, where gross margin is divided by net sales to get the gross margin percentage, and net sales is divided by average inventory at cost to get the inventory turnover rate. This formula takes into account the amount invested in inventory and the effectiveness of inventory management in generating profits.

Question 3

When a retailer has a yearly turnover rate that is _____ or more times a year,the percentage variation method is most commonly used for determining planned stock levels.

Accepted Answer

E

Question 4

If a buyer lowers planned reductions by $7,000 for the month,this will:

Accepted Answer

Planned reductions are subtracted from planned purchases to determine the Open-to-Buy (OTB) for the month. By lowering planned reductions by $7,000, the OTB for the month will also be lowered by $7,000. None of the other options are directly related to planned reductions.

Question 5

The _____ is NOT considered when calculating BOM stock using the basic stock method.

Accepted Answer

The basic stock method does not consider the number of weeks in the retailer's merchandising season; it focuses on monthly or seasonal calculations.

Question 6

The difference between a retailer's planned purchases and the retailer's open-to-buy is:

Accepted Answer

The difference between a retailer's planned purchases and the retailer's open-to-buy is the merchandise that the retailer has already ordered but has not yet received. This is because open-to-buy is calculated by subtracting on-order merchandise from the planned purchases for a certain period.

Question 7

All of the following are methods of dollar merchandise planning EXCEPT:

Accepted Answer

All of the options are methods of dollar merchandise planning except for E, valuation turns. Valuation turns refer to the number of times inventory is sold and replaced in a given period, whereas the other options are methods for determining the optimal levels of inventory to maintain based on sales and other factors.

Question 8

If a merchandise line has a gross margin of 35 percent and sales per dollar of inventory investment of 4.0,what is its GMROI?

Accepted Answer

GMROI (Gross Margin Return on Investment) is calculated by multiplying the gross margin percentage by the sales per dollar of inventory investment. Here, 0.35 (35%) * 4.0 = 1.40.

Question 9

The following planned figures have been developed by a buyer for next month: sales = $100,000; reductions = $7,000; EOM stock = $250,000; BOM stock = $300,000; commitments for delivery during next month = $15,000.What are planned purchases and OTB for the buyer?

Accepted Answer

Planned Purchases = Sales + EOM Stock + Reductions - BOM Stock = $100,000 + $250,000 + $7,000 - $300,000 = $57,000. OTB (Open to Buy) = Planned Purchases - Commitments = $57,000 - $15,000 = $42,000.

Question 10

The analysis,planning,acquisition,handling,and control of the merchandise investments of a retail operation is termed:

Accepted Answer

Merchandise management encompasses all the processes involved in handling and controlling a retail operation's merchandise investments, including analysis, planning, acquisition, and inventory management. Options A, B, C, and E are narrow in scope and do not fully capture the breadth of activities involved in merchandise management.

Question 11

Which of the following is NOT a formal way of deciding inventory levels?

Accepted Answer

Gross margin contribution is not a formal method for deciding inventory levels; it is a financial metric used to assess profitability, not to directly determine how much inventory should be held.

Question 12

_____ is the dollar amount that a buyer can currently spend on merchandise without exceeding a planned dollar stock level.

Accepted Answer

Open-to-buy is the dollar amount that a buyer has available to spend on merchandise without exceeding a planned dollar stock level. It is a tool used in merchandise planning to ensure that inventory levels remain within budgeted amounts. The open-to-buy amount is calculated by subtracting the planned ending inventory from the planned total sales for a given period.

Question 13

Planned purchases at retail are computed as follows:

Accepted Answer

Planned purchases at retail are calculated as the sum of planned sales, planned reductions, and planned end-of-month (EOM) stock minus planned beginning-of-month (BOM) stock. This formula takes into account the expected sales and markdowns during the period as well as the desired inventory levels at the beginning and end of the period.

Question 14

The _____ method of merchandise planning requires that,in addition to a base stock level,there will be a variable amount of inventory that will increase or decrease at the beginning of each sales period.

Accepted Answer

The basic stock method involves maintaining a base level of inventory plus a variable amount that adjusts according to the sales forecast for each period, allowing for both a consistent stock level and flexibility based on sales trends.

Question 15

The following information is known for a buyer of cosmetics:
$\begin{array} { ll } 
 \text {Planned sales for the month }&\$42,000\
 \text {Planned EOM stock }&\$60,000\
 \text {Planned reductions }&\$4,800\
 \text {BOM inventory }&\$72,000\
 \text { Merchandise commitments for delivery}&\$9,600\
\end{array}$

What is the cosmetic department's open-to-buy at retail?

Accepted Answer

The open-to-buy (OTB) at retail is calculated as: Planned Sales + Planned EOM Stock + Planned Reductions - BOM Inventory - Merchandise Commitments. Substituting the given values: $42,000 + $60,000 + $4,800 - $72,000 - $9,600 = $25,200.

Question 16

The following planned figures have been developed by a buyer for next month: sales = $25,000; reductions = $1,500; BOM stock = $80,000; EOM stock = $88,000; commitments already made for delivery during next month = $5,600.What are planned purchases and OTB for the buyer?

Accepted Answer

Planned purchases = (Sales + Reductions + EOM stock) - BOM stock = ($25,000 + $1,500 + $88,000) - $80,000 = $34,500. OTB (Open-to-Buy) = Planned Purchases - Commitments = $34,500 - $5,600 = $28,900.

Question 17

When retailers believe that it is necessary to have a given level of inventory available at all times,they will likely use the _____ method for inventory management.

Accepted Answer

The basic stock method involves maintaining a pre-determined level of inventory at all times to ensure that demand can be met. It is a common method used by retailers to manage their inventory levels.

Question 18

Determine the buyer's BOM for March,using the percentage variation method,based on the following information: planned sales for March = $200,000; total spring sales = $600,000; spring months = 4; inventory turnover = 2.5.

Accepted Answer

The answer of Determine the buyer's BOM for March,using the...

Question 19

The _____ dollar inventory planning technique states that the percentage fluctuations in monthly stock from average stock should be half as great as the percentage fluctuations in monthly sales from average sales.

Accepted Answer

The percentage variation dollar inventory planning technique suggests that the percentage change in inventory should be half of the percentage change in sales, helping to stabilize inventory levels relative to sales fluctuations.

Question 20

A $1,000 increase in planned reductions for the month would:

Accepted Answer

The answer of A $1,000 increase in planned reductions for...

Quiz 9: Merchandise Buying and Handling