1. Why does it make sense for campus bookstores to use both perpetual and periodic inventory systems? (4 marks) 2. Why wouldn't it make sense for the bookstore to use the FIFO method? (3 marks) Why wouldn't it make sense for the bookstore to use the LIFO method? (3 marks) 3. Why is inventory management so important to a merchandiser like a bookstore? (5 marks) Minding the Books on Campus COLLEGE OF THE NORTH ST. JOHN'S, N.L.-Like campus bookstores across Can- ATLANTIC ada, the bookstore at the College of the North Atlantic's Prince Philip Drive campus does most of its business in the fall term. In fact, 60 percent of the $1.1 million in projected sales for 2005-2006 were recorded in the first three weeks of September. But with four terms each year, the bookstore- the largest of the college's 17 campus bookstores-buys books year-round for the 3,000 students it serves. As general manager Ed Pinto explains, the number of copies to be ordered for each title depends on the age of the book and the likelihood of used sales. "A few months before the start of a semester, we send a request to the De- partment Heads' Office for itemized enrolment," he says. The College of the North Atlantic's Prince Philip Drive "If a textbook is new, 100 percent of an order is processed. Campus Bookstore For books that are one to two years old or more, we cut the value, list price, and gross margin percentage. The book- order based on past performance. store finds it easier to use the average cost flow assumption To keep track of the 650 items in its inventory-which to track inventory because of price fluctuations with its include stationery and novelty items bearing the school's purchases. "If we have to reorder a title in the same semes- logo-the Prince Philip Drive Campus Bookstore uses ter, we do not change the price to students even if our cost a computerized perpetual inventory system running on has gone up." says Mr. Pinto. Master Merchant point-of-sale software. With terminals To confirm that the report matches actual quantities in each of the college's 17 bookstores, the purchasing or on hand. the Prince Philip Drive bookstore, along with all procurement process is centralized, which keeps prices bookstores provincially, does a physical count of the entire the same throughout the province. "All bookstore inven- inventory each quarter-June 30. September 30. Decem- tories can be viewed by other campus bookstores to allow her 31. and March 31. for stock transfers between branches," explains Dean Bat- Sometimes there is more merchandise on hand than ten, the Prince Philip Drive campus financial officer. This required. "We normally return any surplus books to the pub- reduces the carrying costs of aging unused inventory and lisher for credit." says Mr. Pinto. "When that's not freight costs of ordering and returning stock to publishers. possible, we reduce the price to clear the inventory " monthly valuation report gives itemized figures for and document the markdown in our records." tities in stock. latest cost. average cost, total inventory