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# Understanding How The Buyer Makes Purchasing Decisions - PowerPoint PPT Presentation

Open To Buy. Understanding How The Buyer Makes Purchasing Decisions. What is Open To Buy???. Amount of money a business has left for purchasing goods after all other expenses have been considered. Calculating Open to Buy – Step 1. P - (GR + GO) = OTB P = Planned Purchases = \$ 17,750

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Presentation Transcript

Amount of money a business has left for purchasing goods after all other expenses have been considered.

P - (GR + GO) = OTB

P = Planned Purchases = \$ 17,750

GR= Goods Received = \$ 6,500

GO = Goods Ordered = \$ 3,300

17,750 – ( 6,500 + 3, 000) = OTB

17,750 – 9,500 = 8,250

OTB at Retail Value = 8,250

Once you find the OTB at Retail Value you must then find the OTB at Cost Value

100% - Mark Up % = % Cost of Goods

100 – 45 = 55

55% = Cost of Goods

Cost of Goods % x OTB(Retail) = OTB(Cost)

.55 x 8,250 = 4537.50

OTB at Cost = 4537.50

• The Open To Buy at Cost figure represents the actual amount of money budgeted for making purchases.

• If the buyer uses the Open To Buy at Retail figure they will not only be spending any profit they hope to make, but they will also be spending the money that covers the cost of doing business.

• If the Buyer does not work Steps 1, 2 and 3 when calculating Open To Buy they will create a serious financial problem for their company.

• When you are asked to calculate Open To Buy you are being asked to find the “True” Open To Buy figure which means that you must work Steps 1, 2, and 3 to get the correct amount.

You are to calculate the Open To Buy given the following information:

Planned Purchases \$ 33,886

Goods Ordered \$ 14,377

Mark Up 47%

Step 1

P-(Goods Received + Goods Ordered) = OTB

33,886 - (5,356 + 14,377) = OTB/Retail

33,886 – 19,733 = 14,153

Step 2

100% - Mark Up % = Cost %

100% - 47% = 53%

Step 3

OTB/Retail x Cost % = OTB/Cost

14,153 x .53 = 7501.09