IDIS 240 MAIN EXAMINATION 2026/2027 QUESTIONS
AND SOLUTIONS RATED A+
✔✔Markup - ✔✔- How much money the distributor adds to the cost of goods sold
- Margin dollars = markup dollars, no difference in dollars but different in percentages
- Companies prefer Margin
✔✔Percent Markup - ✔✔((Selling price - COGS) / COGS) * 100%
Larger percentage, we usually don't really care about percent markup
✔✔Operating Expenses (OE) - ✔✔All costs necessary to provide services for the
distributor's customer:
- Warehouse cost
- Inventory holding cost
- Transportation cost
- Bad Debt Expense: Money you expect to not get back, "This man owes me $200 from
30 years ago"
✔✔Selling, General, and Administrative Expenses (SG&A) - ✔✔- Salaries,
commissions, and other payroll costs that we pay our executives and sales persons
- Outside Sales: Travel costs, Entertainment costs, Advertising Costs
✔✔Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) -
✔✔Margin - OE - SG&A
✔✔Depreciation and Amortization (DA) - ✔✔- Expensive that captures the reduction in
value of assets over time
- Using it as an expense to decrease your income, to lower your taxes
✔✔Earnings Before Interest, and Taxes (EBIT) - ✔✔Represents the profit before
interest and taxes are subtracted
✔✔Interest Expense - ✔✔Cost paid to borrow money
✔✔Net Profit Before Tax (NPBT) *** - ✔✔EBIT - Interest Expense
✔✔Net Profit After Tax (NPAT) *** - ✔✔- Represents the money that can be spent,
distributed to shareholders (dividends), reinvest in the company to fund its growth
, - Do whatever we want with it, hopefully legal stuff
✔✔Accounts Payable - ✔✔Money distributors own the manufacturer for products
bought
✔✔Accounts Receivable - ✔✔Money that the customer owes the manufacturer
✔✔Days Sales Outstanding - ✔✔- (Receivable Dollars * 365 ) / Sales
- 30 days in the usual, gets scary around 45
- Interest + late fees for credit card
- No fee for normal distributors, we just pray they pay it back
✔✔Inventory / Stock - ✔✔Items purchased, brought into our warehouse, and held on
hand for resale
✔✔Average Warehouse Inventory - ✔✔Average amount of inventory in the warehouse
✔✔Inventory Turn - ✔✔Item turn is complete when:
Item Purchase → Put into Inventory → Sold → Money is collected → Another product
purchased
= (COGS from Inventory / Average Warehouse Inventory)
✔✔Gross Margin Return on Inventory Investment (GMROII) - ✔✔- (Gross Margin
Dollars Earned on Warehouse Sales / Average Warehouse Inventory)
- Better measure of how distributor used their inventory to gain margin dollars
✔✔Wayne Gary - ✔✔Master Pumps
✔✔Ryerson - ✔✔Travis Hibbets
✔✔Trade Discounts - Example
$2,000 worth of wire (20 rolls * $100 per roll) is being purchased with trade discounts of
"twenty-five, ten, and five" - ✔✔Lead discount / The first discount is 25%
Subsequent discounts / The supplementary discounts are 10% and 5%
Step 1:
List price of the wire = $100 (per roll)
Invoice = $100 x 20 = $2,000
AND SOLUTIONS RATED A+
✔✔Markup - ✔✔- How much money the distributor adds to the cost of goods sold
- Margin dollars = markup dollars, no difference in dollars but different in percentages
- Companies prefer Margin
✔✔Percent Markup - ✔✔((Selling price - COGS) / COGS) * 100%
Larger percentage, we usually don't really care about percent markup
✔✔Operating Expenses (OE) - ✔✔All costs necessary to provide services for the
distributor's customer:
- Warehouse cost
- Inventory holding cost
- Transportation cost
- Bad Debt Expense: Money you expect to not get back, "This man owes me $200 from
30 years ago"
✔✔Selling, General, and Administrative Expenses (SG&A) - ✔✔- Salaries,
commissions, and other payroll costs that we pay our executives and sales persons
- Outside Sales: Travel costs, Entertainment costs, Advertising Costs
✔✔Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) -
✔✔Margin - OE - SG&A
✔✔Depreciation and Amortization (DA) - ✔✔- Expensive that captures the reduction in
value of assets over time
- Using it as an expense to decrease your income, to lower your taxes
✔✔Earnings Before Interest, and Taxes (EBIT) - ✔✔Represents the profit before
interest and taxes are subtracted
✔✔Interest Expense - ✔✔Cost paid to borrow money
✔✔Net Profit Before Tax (NPBT) *** - ✔✔EBIT - Interest Expense
✔✔Net Profit After Tax (NPAT) *** - ✔✔- Represents the money that can be spent,
distributed to shareholders (dividends), reinvest in the company to fund its growth
, - Do whatever we want with it, hopefully legal stuff
✔✔Accounts Payable - ✔✔Money distributors own the manufacturer for products
bought
✔✔Accounts Receivable - ✔✔Money that the customer owes the manufacturer
✔✔Days Sales Outstanding - ✔✔- (Receivable Dollars * 365 ) / Sales
- 30 days in the usual, gets scary around 45
- Interest + late fees for credit card
- No fee for normal distributors, we just pray they pay it back
✔✔Inventory / Stock - ✔✔Items purchased, brought into our warehouse, and held on
hand for resale
✔✔Average Warehouse Inventory - ✔✔Average amount of inventory in the warehouse
✔✔Inventory Turn - ✔✔Item turn is complete when:
Item Purchase → Put into Inventory → Sold → Money is collected → Another product
purchased
= (COGS from Inventory / Average Warehouse Inventory)
✔✔Gross Margin Return on Inventory Investment (GMROII) - ✔✔- (Gross Margin
Dollars Earned on Warehouse Sales / Average Warehouse Inventory)
- Better measure of how distributor used their inventory to gain margin dollars
✔✔Wayne Gary - ✔✔Master Pumps
✔✔Ryerson - ✔✔Travis Hibbets
✔✔Trade Discounts - Example
$2,000 worth of wire (20 rolls * $100 per roll) is being purchased with trade discounts of
"twenty-five, ten, and five" - ✔✔Lead discount / The first discount is 25%
Subsequent discounts / The supplementary discounts are 10% and 5%
Step 1:
List price of the wire = $100 (per roll)
Invoice = $100 x 20 = $2,000
