2% / 10th prox net 25th
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A 2% discount is allowed if paid on or before the tenth day of the month
after the invoice date. Otherwise the entire invoice is due on or before the
25th day of the month after the invoice date.
Converting from Percent Markup to Percent Gross Margin - Example 4
If a distributor purchases an item for $100 with trade discounts of "two fives" what is
the cost?
At 20% margin, what is the sale price and gross margin? If the manufacturer provides
the distributor an additional "five," what is the new sale price and gross margin if we
extend the customer the "five" off the sale price? What is the effect on margin dollars?
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, Using Multipliers for 5% & 5% discounts,
COGS = 100x0.95x0.95 = $90.25
Given: 20% Gross Margin
Selling Price = 90.25 /(100% - 20%) = 90.25 /0.8 = $112.8125
Margin dollars = $112.8125- $90.25 = $22.5625
If the manufacturer provides the distributor an additional "five,"
COGS = 100x0.95x0.95x0.95 = $85.7375
Selling Price = 112.8125x0.95 = $107.1718
Gross Margin in dollars = $21.4343
Gross Margin = (21.4343/107.1718)*100% = 19.999%
Be careful not to pass on all of the discounts and reductions, it reduces the
gross margin in dollars.
Returns
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You don't get all of your money back, 10-20% restocking fee
Claims
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, Making a claim that it is broken, damaged, lost. Billing or shipping errors,
shortages
Accounts Payable
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Money distributors own the manufacturer for products bought
The Power of Small Numbers
Four Scenarios
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- Impact of growing sales: 5% growth
- Impact of buying better: 2% less in cost of goods sold
- Impact of reducing expenses: 5% less in each expense category
- Impact of raising prices: 2% increase in overall prices
Unit of Measure - UOM
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, The unit in which the quantity of an item is managed, e.g., pounds, each,
box of 12, package of 20, or case of 144. Various UOMs may exist for a
single item. For example, a product may be purchased in cases, stocked in
boxes, and issued in single units.
Debt vs Equity Financing
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Taking out a loan and going into debt vs having someone pay you for a
share of your business
Free On Board (FOB)
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- Commonly used on the invoice to show who is to pay the transportation
charges
- Who is to control the movement of the shipment
- Where the title passes to the buyer
Pricing / Profit Impact Raising Prices
Give this one a try later!
Give this one a try later!
A 2% discount is allowed if paid on or before the tenth day of the month
after the invoice date. Otherwise the entire invoice is due on or before the
25th day of the month after the invoice date.
Converting from Percent Markup to Percent Gross Margin - Example 4
If a distributor purchases an item for $100 with trade discounts of "two fives" what is
the cost?
At 20% margin, what is the sale price and gross margin? If the manufacturer provides
the distributor an additional "five," what is the new sale price and gross margin if we
extend the customer the "five" off the sale price? What is the effect on margin dollars?
Give this one a try later!
, Using Multipliers for 5% & 5% discounts,
COGS = 100x0.95x0.95 = $90.25
Given: 20% Gross Margin
Selling Price = 90.25 /(100% - 20%) = 90.25 /0.8 = $112.8125
Margin dollars = $112.8125- $90.25 = $22.5625
If the manufacturer provides the distributor an additional "five,"
COGS = 100x0.95x0.95x0.95 = $85.7375
Selling Price = 112.8125x0.95 = $107.1718
Gross Margin in dollars = $21.4343
Gross Margin = (21.4343/107.1718)*100% = 19.999%
Be careful not to pass on all of the discounts and reductions, it reduces the
gross margin in dollars.
Returns
Give this one a try later!
You don't get all of your money back, 10-20% restocking fee
Claims
Give this one a try later!
, Making a claim that it is broken, damaged, lost. Billing or shipping errors,
shortages
Accounts Payable
Give this one a try later!
Money distributors own the manufacturer for products bought
The Power of Small Numbers
Four Scenarios
Give this one a try later!
- Impact of growing sales: 5% growth
- Impact of buying better: 2% less in cost of goods sold
- Impact of reducing expenses: 5% less in each expense category
- Impact of raising prices: 2% increase in overall prices
Unit of Measure - UOM
Give this one a try later!
, The unit in which the quantity of an item is managed, e.g., pounds, each,
box of 12, package of 20, or case of 144. Various UOMs may exist for a
single item. For example, a product may be purchased in cases, stocked in
boxes, and issued in single units.
Debt vs Equity Financing
Give this one a try later!
Taking out a loan and going into debt vs having someone pay you for a
share of your business
Free On Board (FOB)
Give this one a try later!
- Commonly used on the invoice to show who is to pay the transportation
charges
- Who is to control the movement of the shipment
- Where the title passes to the buyer
Pricing / Profit Impact Raising Prices
Give this one a try later!
