#### Transcript If your annual turnover rate is 4 times, which inventory stock level

If your annual turnover rate is 4 times, which inventory stock level method would you use and why?

• Basic stock is good if less than 6 times a year or if sales are erratic. Need a given level of inventory at all times, and a safety stock. Easily adjusted to accommodate the unexpected.

The Corner Hardware Store is attempting to develop a merchandise budget for the next 12 months. To assist in this process, the following data have been developed. The target inventory turnover is 4.8 and forecast sales are: 5 6 7 8 9 Month Sales 1 2 3 4 10 11 12 Forecast \$27,000 26,000 20,000 34,000 41,000 40,000 28,000 27,000 38,000 39,000 26,000 28,000 374,000 Basic Stock Method Average Stock = Sales/turnover = 374k/4.8 = 77,916.67

Basic stock = 77,915.67 - 31,166.67 = 46,749 B.O.M. = 46,749 + 27k = 73,749 = 46,749 + 26k = 72,749 = 46,749 + 20k = 66,749 = 46,749 + 34k = 80,749 = 46,749 + 41k = 87,749 = 46,749 + 40k = 86,749 = 46,749 + 28k = 74,749 = 46,749 + 27k = 73,749 = 46,749 + 38k = 84,749 = 46,749 + 39k = 85,749 = 46,749 + 26k = 72,749 = 46,749 + 28k = 74,749

The Corner Hardware Store is attempting to develop a merchandise budget for the next 12 months. To assist in this process, the following data have been developed. The target inventory turnover is 4.8 and forecast sales are: 7 8 9 10 11 12 3 4 5 6 Month Sales 1 2 Forecast \$27,000 26,000 20,000 34,000 41,000 40,000 28,000 27,000 38,000 39,000 26,000 28,000 Percentage Variation Average Stock = Sales/turnover = 374k/4.8 = 77,916.67

Average sales = 31,166.67

B.O.M. = 77,916.67 X .5(1+(27k/31,166.67)) (Per. 1 and 8) = 77,916.67 X .5(1+.86) = 72,708 2 and 11 = 71,458 3 = 63,958 4 = 81,458 5 = 90,208 6 = 88,958 7 and 12 = 73,958 9 = 86,458 10 = 87,708

A buyer is going to market and needs to compute the open-to-buy. The relevant data are as follows: planned stock at the end of March, \$319,999 (at retail prices); planned March sales, \$ 149,999 ; current stock-on-hand (March 1), \$274,000 ; merchandise on order for delivery, \$17,000 ; planned reductions, \$11,000 . What is the buyer’s open-to-buy?

EOM = 319,999 Planned Sales = 149,999 Pld Reductions = 11,000 Requirements = 480,998 BOM = 274,000 Planned purch.= 206,998 On Order = 17,000 OTB = 189,998 300,000 -93,000

If a vendor ships you \$1,000 worth of merchandise on April 27 with terms of 3/20, net 30 EOM, how much should you pay the vendor on June 8?

If after the 25 th , is considered part of the next month so counting begins the end of May. 3% discount if pay before June 20. Total due on June 30 June 8 th would pay 1000-(1000*.03) or 1000-30 = 970

A retailer purchases goods that have a list price of \$7,500. The manufacturer allows a trade discount of 40 -25-10 and a cash discount of 2/10, net 30. If the retailer takes both discounts, how much is paid to the vendor?

7500 –(.4*7500) = 7500 – 3000 = 4500 (25 and 10 go to others between the retailer and manufacturer) 4500- (.02 * 4500) = 4500 – 90 = 4410 4500- (0.2*7500) = 4500 – 150 = 4350