Question

Last Fall, the active sportswear department achieved a 45.9% gross margin with a stock turn of 2.1. The markup was 60.3%. During this Fall season the gross margin was increased to 50.5% while everything else will be planned for the same. Calculate the percentage change in GMROI over last year.

Answer 1

Solution :-

Gross Margin (given in question) = 45.9%

Stock Turnover (given in question) = 2.1

2.1 × 45.9% = $ 0.9639 (A)

Mark up given in the question is 60.3%

Therefore, 100% - 60.3% = 39.7% = 0.397 (B)

GMROI = (A÷B) = (0.9636 ÷ 0.397) = 2.43 --------- Last year GMROI

Then during the season fall, the gross margin is increased to 50.5%

Stock Turnover = 2.1

GMROI for the current year = 2.1 × 50.5% = 1.0605 (A)

100% - 60.3% = 39.7% = 0.397 (B)

GMROI = (A÷B) = (1.0605 ÷ 0.397) = 2.67 --------- Current year GMROI

Conclusion :- 2.43 is the GMROI of the last year as compared to 2.67 s the GMROI of the current year