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

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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.

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

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### 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:

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

Month Forecast Sales

1 \$27,000

2 26,000

3 20,000

4 34,000

5 41,000

6 40,000

7 28,000

8 27,000

9 38,000

10 39,000

11 26,000

12 28,000

374,000

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:

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

Month Forecast Sales

1 \$27,000

2 26,000

3 20,000

4 34,000

5 41,000

6 40,000

7 28,000

8 27,000

9 38,000

10 39,000

11 26,000

12 28,000

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 = 17,000300,000

OTB = 189,998-93,000

### 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