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:
Month
Sales
1
2
3
4
5
6
7
8
9
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:
Month
Sales
1
2
3
4
5
6
7
8
9
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
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 25th, 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 8th 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
```