Example (practice numbers, not real prices)
| Item | Cost | Price | Sold per month | Sales | Gross profit | Margin |
|---|
| Rice, 1 kg | 48 | 54 | 300 | 16,200 | 1,800 | 11.1% |
| Soft drink | 20 | 24 | 400 | 9,600 | 1,600 | 16.7% |
| Instant noodles | 11 | 13 | 600 | 7,800 | 1,200 | 15.4% |
| Eggs, 1 piece | 8 | 10 | 450 | 4,500 | 900 | 20.0% |
| Sardines, can | 20 | 24 | 200 | 4,800 | 800 | 16.7% |
| Shampoo sachet | 6.50 | 8 | 500 | 4,000 | 750 | 18.8% |
| Total | | | | 46,900 | 7,050 | 15.0% |
Rice, soft drink and noodles give PHP 4,600 of the PHP 7,050 (about 65%), so they are the A items. Rice has the lowest margin but the highest peso profit.
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I'm learning "Store Operations: stock, credit and margins" on The Future Market. Lesson 1: "Know which items make your money".
What the lesson teaches:
- Gross profit per month for an item = (selling price - cost) x pieces sold in the month. This is different from margin: a low-margin item that sells a lot can bring more peso profit than a high-margin item that sells a little.
- Blended margin = total gross profit of all items ÷ total sales of all items. It tells you the real margin of the whole store, not of one item.
- ABC grouping is a simple way to sort items: A items bring the most gross profit, B a medium amount, C a small amount. Many shops find that a small share of items brings a big share of profit (the "80/20 idea" is a rule of thumb, not a law). Check it with your own numbers.
- Use the groups to decide where to spend attention: never run out of A items, count B items weekly, and review C items monthly. Cut C items that tie up cash and sell slowly.
The exercise I'm working on:
Complete the table for your own 10 items (or practice items). Find your blended margin and name your three A items. Write one C item you could stop stocking and why. ---
I'm stuck. Please:
1. Explain the main idea in plain, simple words with one everyday example.
2. Walk me through the exercise one small step at a time. Ask me what I've done so far before giving the next step.
3. Don't just give me the final answer. Help me do it myself, and check my work when I share it.
I'm a parent helping my child (about 8 years old) with a lesson called "Know which items make your money" from the course "Store Operations: stock, credit and margins".
Here's what the lesson says:
Imagine a school bag with six books. Some books you use every day, some almost never. If the bag is too heavy, you carry the useful ones first. A store is the same: a few items bring most of the profit, so watch those first.
The activity:
Complete the table for your own 10 items (or practice items). Find your blended margin and name your three A items. Write one C item you could stop stocking and why. ---
Please explain this so an 8-year-old understands: short sentences, a fun everyday example, and no hard words.
Then give me 3 simple questions I can ask my child to check they understood, and a way to do the activity together, one tiny step at a time.