Fashion Merchandising and Entrepreneurship
What the exam tests
Merchandising mathematics, assortment and buying, pricing, and the basics of a fashion enterprise: cost sheet, break-even and cash flow.
Core rules
- Markup is the difference between cost and selling price. Markup on cost = markup ÷ cost; markup on retail = markup ÷ retail.
- Markdown is a reduction in retail price; markdown % is usually taken on the original retail.
- Gross margin = sales − cost of goods sold. Stock turn = sales ÷ average stock.
- Open-to-buy = planned purchases − stock on hand − stock on order.
- The merchandiser balances the six rights: merchandise, price, place, time, quantity and customer.
- A business plan needs a cost sheet, break-even point, cash-flow forecast and a clear target customer.
Worked example
A top costs ₹500. The merchandiser wants a 40% markup on retail. Reasoning: retail = cost ÷ (1 − markup on retail) = 500 ÷ 0.60 = ₹833.33. The markup amount is ₹333.33. As a percentage of cost, that is 333.33 ÷ 500 = 66.7%. If the buyer instead meant 40% markup on cost, retail would be 500 × 1.40 = ₹700, so the wording changes the price by ₹133.33.
Traps
- Mixing markup on cost with markup on retail.
- Taking markdown on the reduced price instead of the original retail.
- Building a business plan with only a selling price and no cost sheet or cash flow.