McFadden’s department store has been a profitable family-owned retail business (consisting of several stores in the Pacific Coast region) since its beginning in 1910. The last five years have been rough due to the economy, and McFadden’s has been losing ground to national department and discount stores moving into the area. The executive team is hopeful that a turnaround is finally occurring. Last year’s sales volume for the entire retail store chain was $50 million. The National Retail Federation (NRF) predicts an increase in retail sales due to positive economic projections being felt throughout the country (e.g., unemployment has been dropping, the stock market is up, so investors have more money in their pockets, working hours have been steadily increasing, and there is an expectation of pent-up consumer demand after a number of years of lower sales and belt-tightening in households). Overall, retailers are expecting one of the best holiday seasons in a long time! The NRF estimates a 5.5% increase in sales during the July to December 2019 season for the Pacific Coast, where McFadden’s operates. Upper management believes that this increase in sales will be felt throughout all of its departments. You are the buyer for Department 121, which sells young men’s clothing. This department has been one of the more profitable departments for the company. Last year (2018), sales from Department 121 for the July–December season reached $750,000. Your sales forecast for this year (2019) must take into consideration the NRF’s prediction for an increase in sales this period, and be based on an initial markup percentage of 52%. Reductions for this period in 2018 totaled $105,000. Management expects the dollar amount of reductions to increase this season by 2% in an attempt to spur additional sales. The following reduction percentages are planned for November and December:

November	December
21%	35%

Relying on information from the last three years, you forecast that 28% of seasonal sales will occur in November and 38% in December:

November	December
28%	38%

You have the following additional information on the historical stock-to-sales ratio for this type of department:

July	August	September	October	November	December
3.0	1.9	2.1	2.2	3.0	3.2

Today is November 11, 2019. Your inventory database has record of an additional merchandise order valued at $300,000 that has yet to be delivered. It's on a container ship arriving at one of the Pacific ports in five days. Also, the distribution center just notified you via the in-house inventory alert system that another large shipment has just arrived on the loading docks for Department 121. This shipment contains merchandise valued at $190,000 and has yet to be scanned into the computer system. Finally, your reports show that your desired beginning-of-the-month stock (BOM) for December is $962,160.

Your job is to prepare a merchandise budget for Department 121 and calculate open-to-buy as of today.

1). Given the NRF's retail trend forecast for 2019, you need to project planned seasonal sales (July–December) for Department 121 for 2019.

2). Calculate Department 121's projected monthly sales for November.

3). Calculate Department 121's existing inventory or BOM inventory for November.

4). Calculate Department 121's desired ending inventory or EOM inventory for November.

5). Notice that Department 121 allocates the highest percentage of reductions in the months of November and December. Why?

Group of answer choices

A. Due to the low level of sales during those months.

B. Due to deep discounting that goes on in pre-Christmas sales.

C. Due to higher than normal shoplifting during those months.

D. Due to lower levels of shoplifting during those months.

Both A and C.

Both B and C.

6). Reductions include all of the following, except:

Group of answer choices

A. Discounts on merchandise to encourage sales)

B. Price cuts to employees.

C. Inventory lost due to damaged or misplaced items.

D. Vendor fraud

E. Senior discounts

F. Accounting errors

Only A, B,C, and E.

Only A, B, C, and D.

All of the above are forms reductions.

Open To Buy Problems

As the buyer for Department 121, it is your responsibility to assess your current open-to-buy (OTB) based on the information above. You would like to bring in some new merchandise to go along with the remaining fall merchandise but are not sure if there is any money available. Your job is to calculate open-to-buy as of November 11th.

Note: Please just provide the numerical answer. Answers with dollar sign will be counted as wrong answers.

7). What is the dollar amount of reductions accounted for in November?

8). Are there commitments that need to be taken into consideration? If so, state the dollar amounts.

9). What are the planned purchases at retail?

10). What is OTB at retail?

11). What is the cost complement percentage?

Note: Please provide the numerical answer. Do not put down percentage sign (%).

12). What is OTB at cost? Round to a whole number with no decimal points.

Answer rating: 100% (QA)

1 787500 2 221250 3 162000 4 216000 5 Both A and C 6 Reductions include all of the following except ... View the full answer