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REVIEW
THE
VOL. LXXXI. No. 13 Published Every SaUrday. Edward Lyman Bill, Inc., 383 Madiscn Ave., New York, N. Y. Sept. 26,1925
Sln8
j!. ( £ o & e r 8 i° ea c r ent "
Retail Music Merchant's Overhead
and Its Relation to Volume
Definitions of the Various Terms Commonly Used in the Study of This Problem and the Various Factors
Which Enter Into This Most Important of All Relationships in Conducting a Retail Business—
an Address by Dan W. Dettelbach Before the Music Merchants' Association of Ohio
different phases, one the buying of merchandise
and the other the selling. Stated differently,
gross profit is merely the measure of buying and
selling operations which are unaffected by cost
in the commercial expense the average business
can realize satisfactory profits on a smaller
margin of profit on sales. Further on we shall
endeavor to determine the causes for this.
In order that you may the more readily fol-
low the discussion there has been prepared and
COMP \ N V A
COMPANY B
A V OF A n & c
COMPANV -
COMPANV D
handed you two exhibits to which reference will
..
$114467 74
100.
$>57/,27 57
100.
$4;9.677,I2
$285,324 14
SALES
!00.
$287.85483
100.
COST OF SALES
be made from time to time. Your attention is
28.17&O2
. 23 75
40 07
92.92fl.68
3f>06
192J.1O.0I
104 44320
36 65
73.539 48
25 SS
66 47
49 14
162,614.13
63.12
235,767.1*
159.(190 55
pi"cSr """' . ' " . : : : : : : : : : : : : : : : : : : :
55.75
180.78B0O
62 80
78.88984
now directed to Exhibit A, which has been pre-
$107,068,76
90.22
KS5.534.R1
99 18
S427.997.69
89 14
02 40
S-VO.S.U75
$2S4,327<8
88 35
24.54
29.12115
Lc« : Inventory—D«. 31st
30.70
142,169.83
29.63
79.09961
83,403 53
29.30
84.457 40
29.34
pared from data of four different companies
$
77.947
61
COST OF SALES
65.68
$176.435 20
68.48
59.58
$2X5.827.86
$180,070 22
63.10
$169,870.08
59.01
dealing
in musical instruments.
$193.84926
34.32
$
81.192.37
31,52
40.42
$105.253
92
$ 40.720U
GROSS PROFIT
36.90
$117,984.75
40.99
Lower Percentage
Salahe,
$ 35.804 23
$ 23.02277
19 40
u m *1!)1.9I7.5A
S 53.581 32
18.78
$ 53.594.S3
1862
6.388.58
379392
3.21
2O5S8I5
5 54
12.25ASB
4 .10
2 47
13,892.13
4. (U
Continuing our discussion of gross profits to
7.604 50
Adverting '.'.'.'l'.'.['.'.'.\\'.'.[\[\\'.'.\\'.'.'..',\.
2,491 80
2 01
24.IIV.J7
5 01
I t . 370.92
2 %
14,067.34
4.B8
Exhibit A
17.11.26
778 79
66
3,1:7 25
1 STO 11)
.67
6.727.89
2.34
10,19172
.. ,
4,189.46
3.53.
3B.IA7 05
O«n« and Store E»Mnj«" [.'.'.\'.'.".'.'.\'.','.'.'.
17A7ft..W
5,<*
11,428.76
6 2(1
3 97
volume you will note by referring to Exhibit A
1.718 02
1.378.50
Salei Promotion
.67
5,415.88
.48
I 88
Prepared f o r
5.728 13
8.058.1.1
2 22
4.083.7c,
Delivery Expense
2 8J
I 42
'.'. '"lisVij " i as
3,565
9n
1 .ID
1.26470
44
o9
that Companies A and B bear out the statement
2JIL56
23727
2.282
98
4,951
5S
1.49
1.19
Tajej—County and' S ' a t c ' . . . . . . . . . - . ' - " . . . .
3.405 70
815.61
! 72
and C o p y -
7 ; IB 51
142 00
237.55
.12
.11
OS
.119011
'20
243 50
.08
57150
relative to a lower percentage of gross profit
123 49
1.185.76
.04
.04
110 91
B i d Account* Charted O f f . . . .
.05
41
20925
righted
by
the
$ 37.42455
$223.350 52
Jl 53
46.56
SU2 018.O5
$ 75.280.87
29.22
.19.26
$1I6.S4985
40 50
on increased volume, Company B showing a de-
Music Mer-
271
$ 5,911.50
2.10
« 11
$ o_-oj.,-.l
OPERATING PROFIT
S 3.295 58
$ 1.13490
! .1«
crease of 2.8 per cent in gross profit on a volume
OTHER INCOME over OTHER t X P E N S E
chants' Asso-
5 .1.7890R
$ I0.S62.94
Income Inlrrnt Received
3 19
$ 26.281.58
5.47
$ 1.678.15
3 71
$ 10.601 82
of sales a little better than double. In com-
173C8
4.236.88
14
6,05500
2.35
6,482.58
1.35
127.64
ciation of Ohio
Discount Earned . . . . . .
2.004.31
668.10
.23
1JW.78
Miscellaneous
61949
52
298.42
305.97
.11
.10
paring this measure as between companies one
3.8$
6
82
$
15,793.89
TOTAL OTHER INCOME.
t 10.0J5.f8
$ 32764.16
5.52
..
S 4.58165
3.88
% 12.627.21
4 .IS
must take into consideration variations of gross
txocn»c
Intern! Paid
4 42
$ 7.63161
S 5255 44
f 5.457 M
$ 12,182.29
2.>3
2.67
2.11
$ 4.006.14
1.39
Discount Allowed •
.60
237.58
| 712.74
.08
profit margin due to effectiveness in manage-
TOTAL OTHER EXPENSE
$ 5,457 11
t 12,18220
$ 5.96818
5.02
2 11
2,53
5 7,809.19
2 75
S 4.006.14
1.39
ment, especially from the buying standpoint.
NET OTHER INCOME . . .
..
$ Ijl6.i
S 4.57877
$ 20.581 87
4.29
1.77
$ 7.924.70
2.77
S 8.621 HI
2.99
NET PROFIT OR LOSS (Accrual)
I 62
* 10.490.27
4 07
$ 1,15997
41
$ 1,90905
$ 9.7*03
» » «
Your attention is again called to Exhibit A and
3.39
Add or Dtiotl-
the figures under the columns headed Companies
076t)/(
J66
K>J27
Pruf,. on . h . h m . l l n « m ha»i.
o,
10«697
3 7.1
38,864.37
4.425,87
1.53
4.92
C and D wherein the per cent of gross profit
xnrr-r - —
llilhniil.ll,ll II.Ililllll:
-
is higher on an increased volume, undoubtedly
due to better or greater buying power, especially
to overhead as commercial expense as the term and expense of doing business, or the turnovers. as to Company C, which does both a wholesale
Sales volume in the commercial field has a and retail business.
will be more readily understood.
When comparing commercial expense (over-
Av(. lor
-CALENDAR YEARS-
head) to volume we have only one basis of
$643,600,110
$876,611000
$799.400.1
comparison that is at all significant and that is
$2
S 91 40000
$190,200-00
$258.20000
the sales volume. In this discussion we shall
268.7(10 IK)
8470000
137.000.00
182*00.00
$ 23,60000
$75,60000
$72,000.00
$30,800.00
$68,100(10
treat the subject in the light of profits, and the
$ S3,20O0O
OPERATING PROFIT
OTHER INtOMF.
15.90000
significant profit margins considered in rela-
9.300110
12.800 00
10.900.00
$ 90,200 JO
$ 39,50000
$ 62,50000
$88.400 00
"$82.900 00
$ 10,700.00
tionship to sales and sales volume are: I. Gross
OTHER F.XPFNSE
1.400.00
1.300.00
1.20000
Inirre.t on llt-int ViyMr
profits; 2. Operating profits; 3. Net profits.
Exhibit B
$ 38.100.00
$_82.9«l.0O
$_45,0O0(H
$ 88.400 00
$_9.50000
NET PROFIT
These three profit margins are basic in nature Prepared f o r
•H to Sale.
% to Sal«
» to S.ilcs
•* to Sales
% to Bales
100.
ion.
too.
100.
^
63 43
6367
66.18
63 73
and should be clearly reflected or set forth in and C o p y -
COST" OF SALES
36. H
33 82
35.33
G":OSS
PROFIT
the operating statement.
righted by the
(CiMMFRCIAL EXPENSE (Overhead)
5.52
6
02
M
u
s
i
c
M
e
r
-
Gross Profit
1 vecutive Sal.r,e.
7 75
9 ol
7.87
mm, ind Slort Salaries
5 88
308
3 59
Gross profit is the margin between net sales chants' Asso-
3 39
4.40
37
.33
34
1.17
7S
i,rt>p
and cost of sales. Operating profit is the mar- ciation of Ohio
1.76
54
I J i n - C o u n t ) Jiid Slate
V ..n and Ufnet hipcnw
gin between gross profit and commercial ex-
2.24
pense. Net profit is the balance after taking
OPERATING PROFIT
7 76
into consideration financial income and expense.
OTHER INCOME and OTHER EXPENSE
:i7
2 52
The relation of gross profits to volume is to be
2.16
1 56
NET OTHER INCOME
considered only as to the margin between cost
686
II 87
NET PROFIT
of sales and sales.
In discussing any subject it is well first to in-
quire into the fundamentals underlying the sub- tendency to lower the gross profit margin per
Your attention is directed at this time to the
ject, and we find gross profits to consist of two cent due to the fact that with increased volume
fact that on Exhibit A the volume of sales in
(Continued on page 4)
in connection with a lesser degree of increase
VERHEAD as applying to a commercial
enterprise is simply another name for
general and administrative or commercial
expenses, consequently we shall hereafter refer
O
C
100
j1
.40
3
117
3
" '
808
$230.80000
$
47,100.00
$
59.8OOOU
$
59.100.00
12,700 00
70Q.OO
• % to S a k s
S
1 E S
64 14
35.85
7 34
8.08
5.28
3.49
1.13
2.72
33.62
28 54
2.95
7.32
1.98
.07
©By Dan W. Dettelbach Audit Co., Cleveland, Ohio.
1 82
1.91
4.77
9
2.1