What is the formula for calculating planned open-to-buy (OTB)?

The formula for calculating planned open-to-buy (OTB) is correctly identified as the sum of the estimated ending inventory ($EOMI$) and the cost of goods sold ($COGS$), from which the beginning inventory ($BOMI$) is subtracted. This formula provides a clear framework for retailers to determine the inventory budget needed for a specific period.

To break this down:

• $EOMI$ represents the inventory level that a business anticipates having at the end of the period and is crucial for ensuring that the business does not over-commit to purchases.

• $COGS$ indicates the total cost of the goods that are expected to be sold during the period, helping in understanding the turnover of inventory.

• $BOMI$ is the inventory level at the beginning of the period, which allows the business to assess how much inventory needs to be ordered to meet sales goals without having excess stock.

By taking the estimated ending inventory and adding the projected sales (cost of goods sold), the calculation provides a comprehensive idea of how much inventory can be purchased. Subtracting the beginning inventory clarifies the amount needing to be acquired to maintain optimal inventory levels throughout the operation cycle, facilitating effective purchasing decisions.

This approach