Sales formulas
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This document defines several common sales formulas used in retail business including formulas to calculate average inventory, cost of goods sold, gross margin, break-even analysis, contribution margin, markup, reductions, and more. It provides the equations for calculating key metrics like gross margin return on investment, inventory turnover, maintained markup percentage, net sales, open to buy, percentage increase or decrease, sales per square foot, and stock to sales ratio.
Sales formulas
- 1. Sales Formulas Average Inventory Average Inventory (Month) = (Beginning of Month Inventory + End of Month Inventory) ÷ 2 Basic Retailing Formula Cost of Goods + Markup = Retail Price Retail Price - Cost of Goods = Markup Retail Price - Markup = Cost of Goods Break-Even Analysis Break-Even ($) = Fixed Costs ÷ Gross Margin Percentage Contribution Margin Contribution Margin = Total Sales - Variable Costs Cost of Goods Sold COGS = Beginning Inventory + Purchases - Ending Inventory Gross Margin Gross Margin = Total Sales - Cost of Goods Gross Margin Return on Investment GMROI = Gross Margin $ ÷ Average Inventory Cost Initial Markup Initial Markup % = (Expenses + Reductions + Profit) ÷ (Net Sales + Reductions) Inventory Turnover (Stock Turn) Turnover = Net Sales ÷ Average Retail Stock Maintained Markup MM $ = (Original Retail - Reductions) - Cost of Goods Sold MM % = Maintained Markup $ ÷ Net Sales Amount Margin % Margin % = (Retail Price - Cost) ÷ Retail Price Markup Markup $ = Retail Price - Cost Markup % = Markup Amount ÷ Retail Price
- 2. Net Sales Net Sales = Gross Sales - Returns and Allowances Open to Buy OTB (retail) = Planned Sales + Planned Markdowns + Planned End of Month Inventory - Planned Beginning of Month Inventory Percentage Increase/Decrease % Increase/Decrease = Difference Between Two Figures ÷ Previous Figure Reductions Reductions = Markdowns + Employee Discounts + Customer Discounts + Stock Shortages Sales per Square Foot Sales per Square Foot = Total Net Sales ÷ Square Feet of Selling Space Stock to Sales Ratio Stock-to-Sales = Beginning of Month Stock ÷ Sales