1. In what special situations are inventory estimation procedures extremely useful?
2. The manager of a retail store has become concerned about the time taken to count the merchandise on hand each quarter. She argues that too much time is spent on this activity with a resulting high cost of labor. She suggests that the company need not take a physical inventory at all but could rely on the retail inventory estimation procedure to arrive at the cost of the inventory. Respond to this argument.
3. What are two specific managerial reasons for using the LIFO method of inventory valuation during a period of rising prices?
4. In order to achieve better control over its investment in inventory, the management of a retail store wishes to get an estimate of the cost of inventory at the close of business each week. Outline a procedure to obtain this estimate without actually taking a physical count.
5. Explain briefly how computers and other electronic devices, such as scanners, have made perpetual inventories more practical.
6. The purchasing manager of a retail store has suggested that the company should maintain a perpetual inventory. The controller opposes this suggestion. In your opinion, on what basis does the controller probably oppose the idea?