Inventory Management Decisions for a Bed Bath & Beyond Store: Assignment – Week 3, Week 3

Summary

Inventory management involves choosing a system, recording purchases and sales, and counting stock. Students learn how to make these decisions for a retail store.

Inventory Systems

Two main inventory systems are the perpetual and periodic systems. The perpetual system keeps a running record of inventory and cost of goods sold. Students decide which system to use for a new retail store.

Recording Purchases and Sales

Net purchases and net sales are recorded differently depending on whether payment is made up front or on account. Students learn how to account for transportation costs in inventory.

Physical Inventory Counts

Physical inventory counts are done to check for losses due to theft, damage, or errors. Students decide how often to do a physical count for a retail store.

Inventory Costing Methods

Different inventory costing methods affect net income and income tax. Students choose methods to either maximize net income or minimize income tax.

Key terms

Perpetual inventory system

A system that keeps a running record of inventory and cost of goods sold.

Net purchases

When a business buys merchandise for resale, increasing inventory and accounts payable.

Net sales

When merchandise is sold, increasing cash or accounts receivable and sales revenue.

Physical inventory count

A count of inventory on hand to check for losses due to theft, damage, or errors.

FIFO

First-In, First-Out: an inventory costing method that produces the lowest cost of goods sold.

LIFO

Last-In, First-Out: an inventory costing method that results in the highest cost of goods sold.

Questions this document helps with

• Which inventory system should a new retail store use?
• How often should a retail store do a physical inventory count?
• Which inventory costing method minimizes income tax?

Summary written with AI from the document's text.