Peter Patel was recently hired as a new manager for Stanley Storage Systems. The company manufactures and assembles office storage systems. His compensation is composed of a base salary and a bonus based on gross profit. The bonuses are to be paid monthly, as determined by the gross profit for the preceding month.
Stanley Storage Systems currently uses a periodic inventory system, but Peter would like to see the company move to a perpetual system. The company’s owners are willing to consider the change, provided that Peter prepares a written analysis outlining the two methods and detailing the benefits and costs of switching to the perpetual system.
Required:
Prepare a report that Peter could present to the owners of Stanley Storage Systems to support his request to change to a perpetual inventory system.