2. 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.

3. 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

4. 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

5. 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 =

6. Calculating Inventory Loss Book AmountActual Amount DVD’s 1,2891,284 Headphones 567 559 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 = [(225 + 5). $2.50]/225 = $2.56 Headphones = [(187 + 8). $3.75]/187 = $3.91

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

8. 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.

9. 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. [1+.0375/4] 3. 4 $3,450. [1.118] $3,858.78

10. Compounding Interest Problems  Problem 1: Principal = 5,422Interest Rate = 2.5% Time = 4 yearsSemi-Annual FV= 5,422(1+.025/2) 4*2 = $5988.52  Problem 2: Principal = 8,678Interest Rate = 1.75% Time = 3 yearsMonthly compounding FV = 8,678(1+.0175/12) 3*12 =$9,145.42

11. 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 $1880.16