This topic contains a solution. Click here to go to the answer

Author Question: Explain the four different methods for planning dollars invested in ... (Read 87 times)

fox

  • Hero Member
  • *****
  • Posts: 540
Explain the four different methods for planning dollars invested in merchandise.

Question 2

A space productivity index:
 a. is typically done when designing a new store's space allocations.
  b. reports on the ability of space allocations to maximize the quantities of merchandise carried.
  c. analyzes the amount of shelf space allocated to particular individual brands across several departments.
  d. measures the percentage of the store's total gross margin from a particular category to the category's percentage of total space utilized.
  e. is based on industry or trade association data.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

Ashley I

  • Sr. Member
  • ****
  • Posts: 344
Answer to Question 1

The four different methods for planning dollars invested in merchandise are: (1) basic stock, (2) percentage variation, (3) weeks' supply, and (4) the stock-to-sales-ratio method.
Basic Stock Method: The basic stock method (BSM) is used when retailers believe that it is necessary to have a given level of inventory available at all times. It requires that the retailer always have a base level of inventory investment regardless of the predicted sales volume. In addition to the base stock level, there will be a variable amount of inventory that will increase or decrease at the beginning of each sales period in the same dollar amount as the period's sales are expected to increase or decrease. The basic stock method works best if a retailer has a low inventory-turnover rate or if sales are erratic.

Percentage-Variation Method: This method is used when the retailer has a high annual inventory-turnover ratesix or more times a year. The percentage variation method assumes 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.

Weeks' Supply Method: Generally, the WSM formula is used by retailers such as grocers, whose inventories are planned on a weekly, not monthly, basis and where sales do not fluctuate substantially. It states that the inventory level should be set equal to a predetermined number of weeks' supply. The predetermined number of weeks' supply is directly related to the inventory-turnover rate desired. In the WSM, inventory level in dollars varies proportionally with forecast sales. Thus, if forecast sales triple, then inventory in dollars will also triple. Having determined the number of weeks' supply to be stocked and the average weekly sales, stock levels can be replenished on a frequent or regular basis to guard against stockouts.

Stock-to-Sales Method: This method requires the retailer to have a beginning-of-the-month stock-to-sales ratio. This ratio tells the retailer how much inventory is needed at the beginning of the month to support that month's estimated sales. Stock-to-sales ratios can be obtained from internal or external sources. These ratios should only be used as a guide to determine how much inventory to have on hand at the beginning of each month.

Answer to Question 2

D




fox

  • Member
  • Posts: 540
Reply 2 on: Jun 29, 2018
Excellent


aruss1303

  • Member
  • Posts: 314
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

 

Did you know?

All patients with hyperparathyroidism will develop osteoporosis. The parathyroid glands maintain blood calcium within the normal range. All patients with this disease will continue to lose calcium from their bones every day, and there is no way to prevent the development of osteoporosis as a result.

Did you know?

Acetaminophen (Tylenol) in overdose can seriously damage the liver. It should never be taken by people who use alcohol heavily; it can result in severe liver damage and even a condition requiring a liver transplant.

Did you know?

The largest baby ever born weighed more than 23 pounds but died just 11 hours after his birth in 1879. The largest surviving baby was born in October 2009 in Sumatra, Indonesia, and weighed an astounding 19.2 pounds at birth.

Did you know?

Every 10 seconds, a person in the United States goes to the emergency room complaining of head pain. About 1.2 million visits are for acute migraine attacks.

Did you know?

Vaccines cause herd immunity. If the majority of people in a community have been vaccinated against a disease, an unvaccinated person is less likely to get the disease since others are less likely to become sick from it and spread the disease.

For a complete list of videos, visit our video library