1

Merchandise Management: Exercises

1. You have a budget to purchase 100 T shirts for your store. All the T-shirts have
to be purchased from one supplier. The distribution of sizes will be as follows:
Small 12 %, Medium 28 % , Large 32 %, X Large 28 %. Four colors
Red, Blue, White and Black will be represented equally in the colour assortment.
One third of the assortment will be half sleeves and the balance will be full
sleeves. Develop an assortment plan based on this information.

2. You are the buyer for mens shirts for a department store chain. You need to
purchase short sleeve, plain, 100 % cotton shirts from two vendors (Louis
Philippe 75 % and Arrow 25 %). Each LP shirt will cost Rs. 200, while each
Arrow shirt will cost 300. Colours will be distributed in the following manner:
LP White (50 %), Blue (35 %), Yellow (10 %), Pink (5 %)
Arrow White (70 %), Blue (30 %)
All colours will be purchased in the following size distribution:
39 10 %, 40 25 %, 42 35 %, 30 %
Based on the information provided, develop an assortment plan.


3. Big Buy is a menswear retailer. The management expects a 10 % increase in
sales in the next year. No major fluctuation in the sales pattern is expected in the
year to come. The total reductions for the next year are Rs.1,26,500. With the
information given you need to prepare a six-month merchandise budget for the
current year. The sales and other data for the past year are given below.
The sales for the six months January to June are given below:

SIX MONTH MERCHANDISE PLAN

JANUARY FEBRUARY MARCH APRIL MAY JUNE TOTAL

SALES 200,000 180,000 190,000 200,000 180,000 200,000 1,150,000
% OF TOTAL 17.39 15.65 16.52 17.39 15.65 17.39 100.00
STOCK: SALES 1.8 1.5 1.5 1.8 1.5 2
RATIO % OF
REDUCTIONS 10 10 15 25 25 15 100


OTB is a control figure that represents the amount of merchandise the buyer may
place an order for, without exceeding the planned stock figure at the end of the
period. It is the difference between planned purchases for a period and the
merchandise orders already placed or received for that period.

OTB for the balance of the month = planned purchases for the month
merchandise received during the month outstanding orders to be delivered
during the month.

It can also be calculated as Planned EOM Stock Projected EOM Stock.
Or can be expressed as:
2
Merchandise needed for the period merchandise available = OTB

4. Calculate the OTB for the month of April given the following data. Planned
purchases for April Rs.60, 000. Goods received from the 1 st to the 15 th of April
Rs.35, 000 and orders to be delivered in April are worth Rs.12, 000.

5. A buyer for a chain store has planned purchases of Rs 16, 80,000 for his
category of goods. 940,000 worth of goods have already been received in June
and sent to the branches. A balance of Rs.690, 000 worth of goods is pending for
delivery in the month of June. What is the buyers OTB for the month of June?

6. Ms Fussed, the owner of Fashion boutique watches the open to buy figure very
carefully each month. She uses one OTB figure for her small shop that includes
dresses, suits, scarves, jewellery and other accessories. For September, she
has planned to purchase Rs.52, 000 worth of stock. By the 5th of September,
she has received Rs.8, 000 worth of dresses, Rs.10, 000 worth of suits, Rs.900
of scarves, Rs.1, 100 worth of jewellery and Rs.400 of other accessories. A
shipment of dresses and suits worth Rs.12, 000 arrived on September 16th.
What is the OTB amount that is available to her for the month of September?

7. The inventory at retail for a product in a dept store stood at Rs. 40,000 on August
1, with an inventory planned at Rs. 50,000 on August 31. Planned sales were
Rs.25, 000 with mark downs of Rs.2, 000 for the month. The buyer had already
made commitments for August of Rs.12, 000 at retail. Calculate the OTB

8. Anita, a casual wear buyer for Go Shop department store, is planning to buy a
large number of casual wear t-shirts, etc for the annual sale in January. She
needs to determine whether she has adequate funds. Help her determine the
OTB as on December 18th. The following data is available :

Present Inventory at retail (Dec 18th) : 10,000
Inventory commitments (Dec 18th) : 2,000
Planned EOM inventory (Dec 31st) : 30,000
Planned sales : 8,500
Actual Sales : 7, 100
Planned markdowns : 1,000
Actual markdowns : 850