Need Help Answering These Questions Submit Responses To Ques

Need Help Answering These Questionsubmit Responses To Questions Below

Need help answering these questions submit responses to questions below and receive 5 Extra Credit points (1 pt per question). Question 1: A buyer’s sales for October are estimated at $15,000. Her stock on October 1 is $38,000, and she has $11,000 stock at retail on order for the month. Markdowns are planned at 8% for the month, and the planned EOM stock is $40,000. Determine the OTB on October 1.

Question 2: March figures for the junior sportswear department are as follows: Planned sales $86,000 Planned markdowns 2,500 Planned BOM stock 180,000 Planned EOM stock 190,000 Outstanding orders 64,000 Planned markup 51% Calculate OTB at retail and at cost.

Question 3: Determine the buyer’s OTB as of November 14 using the following information: Planned sales for November $40,000 Actual sales, November $15,500 Stock on hand, November 14 $65,000 Planned stock, December 1 $50,000 Planned markdowns for the month $3,000 Actual markdowns, November 1-14 $1,000 Stock on order, November 14 $10,000.

Question 4: The Men’s Buyer has June sales of $890,000 and June markdowns of $338,000. June BOM is $2,100,000 and July BOM is $1,750,000. The on order for June is $940,000. Calculate the remaining open-to-buy for June.

Question 5: Find the OTB balance for December when on December 10 the stock-on-hand is $265,000 and the planned sales for the balance of the month are $101,000. Markdowns are planned at $31,000, and planned inventory for December 31 is $150,000, with outstanding orders totaling $21,500.

Paper For Above instruction

Open-to-buy (OTB) is a crucial metric used by retail buyers to manage inventory levels effectively. It represents the budget remaining for purchasing new merchandise, ensuring that stock levels align with sales forecasts and inventory plans. Calculating OTB involves considering current stock levels, outstanding orders, planned sales, markdowns, and target end-of-month stock, providing insights into purchasing capacity and inventory control.

Question 1: October OTB Calculation

The first question involves determining the open-to-buy on October 1 for a buyer with a projected sales of $15,000. Her starting stock is valued at $38,000, with $11,000 worth on order. Planned markdowns amount to 8%, and the expected end-of-month stock (EOM) is $40,000.

To calculate OTB, we use the formula:

OTB = (Planned Sales + Planned Markdowns + EOM Stock) - (Beginning Stock + Outstanding Orders)

Where:

  • Planned Sales = $15,000
  • Planned Markdowns = 8% of sales = 0.08 × $15,000 = $1,200
  • EOM Stock = $40,000
  • Beginning Stock = $38,000
  • Outstanding Orders = $11,000

Calculating total planned inventory requirements:

$15,000 + $1,200 + $40,000 = $56,200

Calculating current inventory and orders:

$38,000 + $11,000 = $49,000

Therefore, OTB:

OTB = $56,200 - $49,000 = $7,200

This indicates the buyer has $7,200 remaining to spend on new inventory on October 1 to meet her sales and stock plan.

Question 2: March OTB at Retail and Cost

The second question involves a department with planned sales of $86,000, markdowns of $2,500, BOM stock of $180,000, EOM stock of $190,000, and outstanding orders of $64,000. The planned markup is 51%. To compute the OTB at retail and cost, we follow these steps:

Step 1: Calculate retail OTB

Retail OTB is based on the projected sales and inventory plans:

Retail OTB = (Planned Sales + EOM Stock + Outstanding Orders) - (Beginning Inventory + Markdowns)

First, determine beginning inventory, which is represented by BOM stock at retail:

  • Beginning Inventory (BOM) = $180,000
  • Markdowns = $2,500

Subtotal of projected retail requirements:

$86,000 + $190,000 + $64,000 = $340,000

Subtract existing stock and markdowns:

$180,000 + $2,500 = $182,500

Therefore, retail OTB = $340,000 - $182,500 = $157,500

Step 2: Calculate cost OTB

The planned markup (51%) allows us to determine the cost value from retail values:

Cost = Retail / (1 + Markup percentage)

Markup percentage = 51% or 0.51

Cost OTB = Retail OTB / (1 + 0.51) = $157,500 / 1.51 ≈ $104,298

Thus, the department has approximately $157,500 at retail and $104,298 at cost remaining in the open-to-buy budget.

Question 3: November 14 OTB Calculation

The third question asks for the OTB as of November 14 with all relevant data: planned sales of $40,000, actual sales of $15,500, stock on hand of $65,000, planned stock on December 1 of $50,000, planned markdowns of $3,000, actual markdowns of $1,000 for November 1-14, and stock on order of $10,000.

The formula remains similar:

OTB = (Planned Sales for remaining period + Planned Markdowns + Planned EOM Stock) - (Stock on Hand + Outstanding Orders + Already Committed Purchases)

Calculate projected sales and markdowns for the remaining period:

  • Remaining days of November's sales: $40,000 - $15,500 = $24,500

Next, planned markdowns for the remaining period are deductive; assuming the $3,000 is for the entire month, then remaining markdowns are:

  • $3,000 - $1,000 = $2,000

Projected EOM stock includes planned stock ($50,000) minus the cost or retail of committed inventories. For the purposes of this calculation, assume the stock on December 1 is the target EOM stock. The total available stock and orders on the date are:

  • Stock on hand: $65,000
  • Stock on order: $10,000

The remaining OTB is:

Remaining sales: $24,500

Remaining markdowns: $2,000

Planned EOM stock: $50,000

OTB = (Remaining sales + Remaining markdowns + Planned EOM stock) - (Stock on hand + Stock on order)

OTB = ($24,500 + $2,000 + $50,000) - ($65,000 + $10,000) = $76,500 - $75,000 = $1,500

The buyer has approximately $1,500 remaining in open-to-buy as of November 14.

Question 4: June Remaining Open-to-Buy Calculation

The fourth question involves a men's apparel buyer with June sales of $890,000, markdowns of $338,000, BOM stocks of $2,100,000, and an open order of $940,000. The goal is to compute the remaining open-to-buy for June.

First, calculate the total planned stock investment:

Starting with BOM stock plus open orders, the total committed inventory is:

  • BOM stock: $2,100,000
  • Plus: Open orders: $940,000

Total actual inventory commitments: $3,040,000

Now, determine the expected sales reduction due to markdowns:

Sales considering markdowns are:

  • Net sales = $890,000 - $338,000 = $552,000

To maintain adequate stock levels, the buyer needs to ensure total stock aligns with projected sales and markdowns, as well as inventory goals. The calculation for remaining OTB is:

Remaining OTB = BOM stock + on-order inventory - sales and markdowns - existing commitments

In actual practice, a simplified formula used is:

Remaining OTB = (Planned BOM + On order) - (Projected sales + Markdown reductions)

Applying these values:

Remaining OTB = $2,100,000 + $940,000 - $552,000 = $2,488,000

This means the buyer has approximately $2,488,000 remaining to spend on new inventory to meet his sales and markdown planning.

Question 5: December OTB Balance Calculation

The final question involves calculating the OTB balance for December when on December 10, stock-on-hand is $265,000, planned sales for the rest of the month are $101,000, planned mark downs are $31,000, planned ending inventory is $150,000, and outstanding orders total $21,500.

The general formula is:

OTB = (Planned Sales + Markdowns + EOM Stock) - (Stock on Hand + Outstanding Orders)

Calculating total projected inventory requirements:

  • Planned sales: $101,000
  • Planned markdowns: $31,000
  • Planned EOM stock: $150,000

Total projected stock needed: $101,000 + $31,000 + $150,000 = $282,000

Current stock and commitments:

  • Stock on hand: $265,000
  • Outstanding orders: $21,500

Calculating remaining OTB:

Remaining OTB = $282,000 - ($265,000 + $21,500) = $282,000 - $286,500 = -$4,500

The negative value indicates the buyer has overspent or needs to reduce planned orders or markdowns to align with their inventory policies. Alternatively, it suggests that the current inventory and orders are sufficient, potentially exceeding needs by $4,500.

Conclusion

Effective management of open-to-buy is essential for retail success, enabling buyers to balance inventory investment with sales forecasts. By rigorously calculating OTB considering all factors—sales, markdowns, stock levels, and outstanding orders—retailers can optimize inventory turnover, reduce markdown losses, and improve profitability. These calculations demonstrate how precise and dynamic OTB management supports strategic purchasing decisions across different seasonal and departmental contexts.

References

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