Question

The president of National Wholesalers suspects that employees are stealing several items of merchandise, particularly items that are small enough to hide in clothing. The president’s suspicions resulted from complaints made in April by several retailers who claimed that shortages were frequently found when orders of financial and programmable calculators were inspected upon receipt.
The assistant controller was asked to provide whatever information might prove helpful in identifying the extent of any problem that might have developed since the end of the previous fiscal year on December 31. The following report was submitted on May 1:
Required:
1. Compute the number of units of each type of merchandise that are unaccounted for on May 1. The company uses a periodic inventory system and the weighted- average inventory costing method.
2. Determine the monetary value of the apparent loss.
3. Assuming that the apparent loss realized during the period January 1– April 30 is representative of the loss that might be realized on these two items during an entire year, would you recommend that (a) a new inventory system be installed in the warehouse at an annual cost of $ 4,000 to maintain perpetual inventory records of these two items of merchandise and (b) a quarterly physical inventory count of these items be implemented at an additional cost of $ 1,000 per quarterly count? Show supporting computations.


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  • CreatedAugust 04, 2015
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