Fashion Economics Unit Cost – Cost per item Fixed Cost – Expenses that must be paid, regardless of how much is sold (like rent, phone bill, electric bill) Economies of Scale – Fixed costs are spread among more goods being produced

Try it! Bakers has fixed costs of $200,000 for it’s Roosevelt Field Store The store grosses $630,000 per month. The shoes they sell retail for $90 per pair. The cost per item is $25 per pair How much profit are they earning? How much profit on each pair?

Try it! Victoria’s Secret has fixed costs of $350,000 for it’s Roosevelt Field Store The store grosses $2,000,000 per month. The average price for their goods is $40 The average cost per unit is $5 How much profit are they earning? How much profit on each unit?

Sales Per Square Foot Abercrombie’s store is 5,000 sq. feet in area Total store sales for 1 month is $2,100,000 What is the Sales Per Square Foot? – $2,100,000 divided by 5,000 = 420 Let’s find our profit per square foot Sales price is $60, Unit cost is $15 Profit is ?? If I sell 35,000 units, what is my profit per square foot?

Gross Margin Gross Margin is an indicator of profitability I take my profit per square foot and divide by my sales per square foot Using the Abercrombie example, what is my gross margin? $315 divided by $420 75% (very high – rather unrealistic) Most stores have a gross margin of 12%-15% What is Gross Margin actually measuring?