Understanding How

The Buyer Makes

Purchasing Decisions

Amount of money a
business has left for
purchasing goods after
all other expenses have
been considered.

Calculating Open to Buy

Step 1
P - (GR + GO) = OTB

P = Planned Purchases = $ 17,750

GR = Goods Received = $ 6,500
GO = Goods Ordered = $ 3,300
17,750 ( 6,500 + 3, 000) = OTB
17,750 9,500 = 8,250
OTB at Retail Value = 8,250

Calculating Open to Buy Step

2
Once you find the OTB at Retail
Value you must then find the OTB
at Cost Value
100% - Mark Up % = % Cost of
Goods
100 45 = 55
55% = Cost of Goods

Calculating Open to Buy Step

3
Cost of Goods % x OTB(Retail) =
OTB(Cost)
.55 x 8,250 = 4537.50
OTB at Cost = 4537.50

Why use Open To Buy at Cost?

The Open To Buy at Cost figure
represents the actual amount of
money budgeted for making
purchases.
If the buyer uses the Open To Buy at
Retail figure they will not only be
spending any profit they hope to make,
but they will also be spending the
money that covers the cost of doing
business.

Why Use Open To Buy at Cost?

If the Buyer does not work Steps 1, 2
and 3 when calculating Open To Buy
they will create a serious financial
problem for their company.
When you are asked to calculate Open
To Buy you are being asked to find the
True Open To Buy figure which
means that you must work Steps 1, 2,
and 3 to get the correct amount.

Lets Practice
You are to calculate the Open To
Buy given the following
information:
Planned Purchases
$ 33,886
Goods Received $ 5,356
Goods Ordered
$ 14,377
Mark Up
47%

The Answer..
Step 1
P-(Goods Received + Goods Ordered) = OTB
33,886 - (5,356 + 14,377) = OTB/Retail
33,886 19,733 = 14,153
Step 2
100% - Mark Up % = Cost %
100% - 47% = 53%
Step 3
OTB/Retail x Cost % = OTB/Cost
14,153 x .53 = 7501.09
The Open to Buy

7501.09