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
10
11
12
3
4
1
2
Month
Sales
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
5
6
3
4
1
2
Month
Sales
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 = 17,000 300,000
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 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