Inventory Terms  Inventory – an amount of goods stored, including raw materials, purchased components, manufactured sub-assemblies, works in process, packaging materials, and finished goods.  Retail Inventory – all goods available for resale.  Inventory Management – the process of buying and storing products for sale while controlling costs for ordering, shipping, receiving, and storage.

Inventory Systems  Perpetual Inventory Control - Tracks the number of items in inventory on a constant basis; usually computerized.  Physical Inventory – stock is visually inspected or counted to determine quantity on hand. Visual Control – card is placed on rack to indicate low levels & prompt reordering Tickler Control – a small portion of the inventory is physically counted each day Annual Inventory Count – all inventory is physically counted once per year

Stock Control Involves monitoring stock levels and investments in inventory.  Dollar Control – the planning and monitoring of the total inventory investment that a business makes during a period of time; tracks purchases, sales, beginning & ending inventory values, and stock shortages.  Unit Control – the quantities of merchandise that a business handles during a period of time. Each item is given a SKU (stock keeping unit). Tracks volume of sales.  Stock Turnover – the number of times the average inventory has been sold and replaced in a time period. Net Sales/Average Inventory

Calculating Inventory Loss  Inventory Loss – a discrepancy between the number of items in inventory records and in actual inventory on shelves or in storage.  Formulas: Unit Inventory Loss = Book Units – Actual Units Inventory Loss $$ = Unit Inventory Loss. Cost per unit [(Units Sold + Unit Inventory Loss). Cost per unit] Units Sold New Cost per Unit =

Calculating Inventory Loss Book AmountActual Amount DVD’s 1,2891,284 Headphones Unit Inventory Loss: DVD = 5Headphones = 8 Cost Per Unit: DVD = $2.50 Headphones = $ 3.75 $ Inventory Loss: DVD = $12.50 Headphones = $30 Units Sold:DVD = 225Headphones = 187 New Cost per Unit:DVD = [( ). $2.50]/225 = $2.56 Headphones = [( ). $3.75]/187 = $3.91

Interest Calculation Interest = Principal. Rate. Time Example: Principal = $2500 Rate = 4.5%Time = 4 years Interest = $450Balance = $2,950

Simple vs. Compounded Interest  Simple Interest - Interest that is calculated only once per year. Uses an annual percentage rate of interest.  Compounded Interest – Interest that is calculated more often than once per year. The interest is added to the principal prior to recalculation for the next period.

Calculating Compounded Interest Future Value Formula: Principal. [1 + Interest Rate / # times compounded] years. times compounded Or FV = P[1 + R/N] y n Example: Principal = 3450Interest Rate = 3.75% Time = 3 yearsQuarterly Compounding $3,450. [ /4] 3. 4 $3,450. [1.118] $3,858.78

Compounding Interest Problems  Problem 1: Principal = 5,422Interest Rate = 2.5% Time = 4 yearsSemi-Annual FV= 5,422(1+.025/2) 4*2 = $  Problem 2: Principal = 8,678Interest Rate = 1.75% Time = 3 yearsMonthly compounding FV = 8,678( /12) 3*12 =$9,145.42

Credit Finance Charges  Finance charges represent interest charged on unpaid credit card balances beyond the 30-day grace period.  Formula: Balance * (1+ Interest rate/12) Month -1  Sample Problem : Balance due in 3 months? Credit Card Balance = $1,825 Credit Card Interest Rate = 18% $1,825 * (1 +.18/12) 3-1 $