Rosa Langley Fashions tags its inventory with retail prices but
Rosa Langley Fashions tags its inventory with retail prices, but does not keep thorough inventory records. The lax system makes it very costly for the company to determine the cost of store inventory. The cost of Rosa Langley Fashions’ merchandise is typically 40% to 60% of retail price, so the company determines cost of ending inventory by calculating retail price of ending inventory and dividing by 2 (to get 50%).
Required:
Write the CEO of Rosa Langley Fashions a letter explaining the errors that might be created by the company’s inventory system.
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