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SUGAR PINE INCENSE CEDAR PONDEROSA PINE WI{ITE FIR

8-2141

229

Florence Ave.

2 times. Total assets are tu'ice that of inventory. Now, if we assume that the overhead is 20/o and we would like to make 2A/o before taxes, \\'e can analyze the various ways that rve might price an item of merchandise that costs $1'00.

In order to get ottr overhead back, lve will have to markup the merchandise 25/". This rvould, of course, returtt 20/o, the Jmount of our overhead. We will then have to get 40c profit to take care of the Z0/o we wish to make on our inr.estment. The reason it has to be 40c instead of 20c is because for every dollar invested in inventory there is a dollar in accounts receivable and fixed assets. This makes a total mark-up of 65/o in order to make 2O/o on investment.

Assuming that this merchandise is the type that would turn once a year, this figure is approximately correct, but if the merchandise happened to fall in a category that would turn 10 times a year, then 11,g t'ould need only 1/10th of the profit or 4c instead of 40c. Now our markup is 29/o.

There is a lot of difference betrveen a 29/o and a 65/o markup, but there is no difierence in these two cases, as stated, as far as return to investment is concerned. One piece of business is just exactly as good as the other.

This explanation I have given you is not technically correct, but it does demonstrate the point that return to net sales is not the properivay to analyze a price.

24c/o as compared to 3.7/o in the second case. Both make the same return to investment, so horv can we say that net profit should be either 5 or 10/c return to sales.

(To be continwed tn the l{ert Issue )

Pcrul Shoemoker qnd Chqirmqn of Nqmed President Boqrd of OHI

The board of directors of Operation Houre Improvement hlrs annonnced the election of I'aul B. Shoemaker as president and chairman of the board, filling the vacancy cattsed by the death of F. Stuart Fitzpatrick of the Chamber of Commerce of the United States. Mr. Shoemaker is vicepresident in charge of sales of the Nlasonite Corporation. James F. Steiner of the U. S. Chamber rvas appointed vice-chairman and secretary. H. R. Northup, executive vice-president of the National Retail Lumber Dealers Association, is treasurer. Other OHI board members include Fred Hecht, Melvin Baker, John Dickerman, George Roscoe

The mathematically correct mark-up in each of these and A. J' Watt' cases is 754o where the turn is once ayear, and30/o in the The board also announced plans for a special advertising other case. These mark-ups will return approximately section in a late September issue of the Saturday Evening 43 ,4o gross profit in the first case, and 23/o gross profit in Post. According to John R. Doscher, executive director of the second, or a net profit to sales in the first case of almost OHI, the section will be one of the largest of this type ever