Planning and Controlling Merchandise

Planning and Controlling Merchandise

James Kennedy

MAN 242

9/26/2015

Athena Halkidis

Fundamentals of Merchandise Planning

The retail method of accounting means that “the value of inventory is determined by retail prices (Kunz, 2010, p. 240).” This is the best method of accounting for your inventory that will be dollars in revenue later. This is commonly used for apparel and other fashion as well as seasonal goods because it is the best reflection of the merchandise value. This is important because it helps for accurate sales projections as well as can be changed in order to keep up with merchandise prices changing. This especially applies to the markets listed earlier because of the fluctuation in their prices as the selling season goes on. For example, during the fall and beginning of winter Christmas goods are at their highest price and as the winter moves on and the holiday season begins to pass, the price in turn goes down so the retailer can finish liquidating the seasonal stock to make room for the next shipment of seasonal goods.

“Merchandise budgets are tools for planning and controlling dollar investment in inventory so the firm can meet its sales goals (Kunz, 2010, p. 275).” This will be an intricate part of your business succeeding. The ability to make an accurate sales budget and be able to stick to it through the year. This will also help to see what will be ahead for your business, in both short term but also a glance at the long-term future as well. Knowing more about where your company is headed will give you an advantage over the competition.

In a retail setting, the reduction in price will in turn have a reduction on the value of the inventory as well. This happens because now as the price has shifted downward, the amount of revenue you can draw from the inventory of that product is lower as well. For example, I buy 100 units of something and begin selling them for $3 each. I have $300 in inventory. No one buys...