The impact of June promotion on sales has inspired Julie and Tracy to reduce their advertising expense by planning better promotions for the pre-fall quarter. Since the boutique does roughly 45% of their total sales in the summer months, the summer quarter is the best time for Julie and Tracy to make strong business decisions and maximize customer traffic, good weather, and a strong inventory assortment.
Part 1: The Sale
As part of South Beach Boutique’s End-of-Summer Blow-Out sale, they plan to mark down all goods sold during Labor Day week by 15%. This is an opportunity to clear out old inventory as they prepare for the fall and winter and look at new inventory for the coming calendar year.
Part 2: The Benefit
In addition, Tracy becomes a sponsor to a local Art Institute campus, which offers a bachelor’s degree in Fashion Design. The school is hosting a goodwill event—a fashion show/gala to benefit a breast cancer research institute. The event has generated substantial social media buzz, and Tracy expects a large turnout.
At the event, Julie and Tracy plan to silent auction one free “shopping spree,” valued at $3,200. The sales of the tickets will benefit the cancer research institute. During late July, the fashion show costs Julie and Tracy $2,250, and the shopping spree is awarded in the second week of August.
Part 3: New Vendor
Julie and Tracy find a new vendor (Way Down) who deals in the same swimwear and accessory lines as their prior vendor (Bounce Apparel). Together, Way Down and South Beach Boutique make a deal to increase the cash discount for early payment of the invoice to 4.15% and to ship directly from the factory. Therefore, all items from Way Down arrive with prepaid freight, and Julie and Tracy manage to decrease their COGS by 1.75% for a total of 33% COGS for summer on net sales (NS) of $381,250.
Julie and Tracy have also laid off one of their full-time employees and increased their social media and Internet fees (in support of the benefit) by 20%. Advertising expense for the quarter is reduced by 10% because of establishment of the promotions. All other expenses remain the same.
Task
This week, perform the following activities.
1. If Julie and Tracy have actual markdowns of 14.45% storewide for Labor Day week and the NS for that week is 25% of the NS for the entire quarter, calculate the markdown dollars for that week.
2. Create a skeletal P&L statement for the summer quarter ending September 30, 2015, using the Excel or Word template.
3. Did South Beach Boutique meet its NS projection for the summer quarter? Compare the earned NS% with the planned NS% (from c). Is it greater or lesser, and by what percentage?
4. Did Julie and Tracy’s pricing strategy work for the summer quarter? Justify your response on the basis of data shown on the skeletal P&L statement.
5. How has South Beach Boutique utilized pricing strategy combined with promotions to establish a more profit-oriented business and an enhanced community image? Explain.
Use the template I uploaded!
Assignment 2: Final Project: South Beach Boutique: Summer Quarter
Markdown dollars for Labor Day Week
Company: South Beach Boutique
For the month _______ Ended
Date ________________
Skeletal profit and loss statement for the summer quarter ending September 30, 2015.
Revenue: Sub Total $ %
Gross Sales
– Customer Returns and Allowances
Net Sales sub total
Net Sales
Cost of Goods Sold:
Billed Cost
+ Freight-in
+ Workroom / Alteration Costs
– Cash Discount
COGS Sub total
– Cost of Goods Sold
Gross Margin (Gross Profit or Loss)
Expenses
Advertising
Charitable Contributions
Insurance
Security
Maintenance
Rent
Meeting Supplies
General Overhead
Wages
Sub-Total Expenses
– Operating Expenses
Net Profit
Net Income (Loss)
If Julie and Tracy have actual markdowns of 14.45% storewide for Labor Day week and the NS for that week is 25% of the NS for the entire quarter, calculate the markdown dollars for that week.
Did South Beach Boutique meet its net sales (NS) projection for summer quarter? Compare the earned NS% with the planned NS%. Is it greater or lesser, and by what percentage?
Did Julie and Tracy’s pricing strategy work for the summer quarter? Justify your response on the basis of data shown on the skeletal profit and loss statement.
How has South Beach Boutique utilized pricing strategy combined with promotions to establish a more profit-oriented business and an enhanced community image? Explain.
Did Julie and Tracy’s business meet its planned reduction in OE%? Explain. Compare the actual vs. projected OE$ performance of summer quarter—is it greater or lesser, and by how much?