Practical Retail Math

Retail Math Glossary

Cash Discounts: A percentage deduction from the invoice cost before shipping for payment within a certain time stated by the supplier.

Cost of Goods Sold (COGS): Expenses directly related to an item sold including the cost price, freight, cash discounts, vendor adjustments and the costs related to prepare merchandise for sale. The total of these costs is called the Cost of Goods Sold (COGS).

E.O.M.: End-of-Month, dating for discount begins on the last day of the month for which the invoice is dated.

F.O.B.: Free-on-board, followed by point of destination, indicates the place at which the title passes to the retailer.

Gross Margin: The amount remaining after the cost of goods sold has been deducted from the total net sales.

Margin: The desired amount established and earned on the sale of a product. It is the difference between the cost and the selling price and is expressed as either a dollar amount or a percentage of the selling price.

Calculate an item's selling price to achieve a desired margin as follows:

The margin dollar amount, percentage and selling price can be calculated several ways if you know at least two of the three numbers:

Markup: The amount added to the original selling price to create a new, higher selling price. Occurs due to price increases.

Net Sales: The amount of money that a store receives from customers after markdowns, returns and other deductions are taken.

Variable Discount: A sliding scale of discount used to encourage early payment of goods, e.g. 5/30/4/60 means a discount of 5% may be deducted if payment is made within 30 days and a discount of 4% between 30 and 60 days.