Badger Liquor Training Manual

1
Badger Liquor Training Manual

• Business Math

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Business Math

• As a result of working through this section, you
  will
• Know the difference between markup on cost and
  markup on sell
• Be able to figure both markup on cost and markup
  on sell
• Figure backwards from the retail price to the
  laid in

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Gross Profit

• Selling Price is the delivered price, per case or
  bottle, to the retailer.
• Gross Profit is the difference between the
  retailers selling price and the cost.
• Example Selling price 75.00
• Cost 50.00
• Gross Profit 25.00

4
Gross Profit Margin

• Gross Profit Margin is the percentage of the
  selling price that is profit.
• Example
• Gross profit per case 25.00 33.33
• Selling price per case 75.00 margin
• This is the method of calculating profit most
  commonly used.

5
Gross Profit Markup

• Gross Profit Markup is the percentage of the cost
  that is profit
• Example
• Gross profit per case 25.00 50
• Cost per case 50.00 markup

6
Annual Case Sales

• Annual Case Sales are the total number of cases
  sold during the year by the account.
• Example
• Opening inventory purchases closing inventory
  annual case sales
• 150 230 - 120 260 cases sold

7
Inventory Turns

• This is a measure of product movement Retailers
  define turns as the number of times a brand is
  sold or turned over during the year., To
  calculate, divide the annual case sales by the
  average case inventory.
• Example Annual Case Sales 60 12 times per year
• Average case inventory 5

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Average Weekly Sales

• This is the average number of cases sold each
  week, expressed on an annual basis.
• Example
• Annual cases sales 200 average
  weekly sales
• 52 weeks 52 4

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Weeks of Supply

• This is the average inventory on hand, expressed
  in terms of weekly sales. To calculate, divide
  the average cases inventory by the average weekly
  sales.
• Example
• Average case inventory weeks of supply
• Average weekly sales

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Mark-up Pricing

• (Also called profit on cost)
• This is the way of pricing at the retail level by
  adding a percentage mark-up to the unit cost.
• Example Bottle Cost 5.00
• Desired mark-up 20
• Equals selling price 6.00

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Margin Pricing

• (Also called profit on sell, gross profit
  pricing, and mark-up on sell) This is the most
  common method for pricing. To compute the price,
  you need to know the desired margin and the
  bottle cost.
• Example
• Reciprocal of Price 1.00 margin desired, or
  1.00 - .20() .80
• Price Bottle cost 5.00 6.25
• Reciprocal of .80
• Profit on sell
• Note The reciprocal is a number subtracted from
  1 of 100, in t his case, since we want a 20
  gross margin, it is 1.00-.20 .80

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Working Backwards Using Mark-UP

• This example will enable you to calculate the
  retail cost of competitive brands if you know the
  percentage markup the retailer uses.
• Example Retail Price 5.00
• Retail mark-up 20
• Calculation 5.00 4.17
• (1.00 .20) retail cost

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Discussing Pricing With Your Accounts

• Only the retailer can determine the retail price
  of the items in the account!
• When you discuss pricing with your customers,
  keep your talk about profitability.
• Knowledge of business math is a critical skill
  for the professional account representative. The
  preceding information will help you talk your
  customers language!