Inventory Management System Question Answer 2022

Answer 1
Sly No Sales
made
Sales
curve
%
Projected
sales
(Assumed)
Sales to
be made On hand On
order O.T. B
1 45,000 22% 204545.4545 1,59,545 1,25,000 40,000 -5,455
2 26 33% 78.78787879 53 36 15 2
3 16,000 19% 84210.52632 68,211 43,000 15,000 10,211
4 52 42% 123.8095238 72 60 24 -12
5 76 36% 211.1111111 135 144 12 -21
Open to Buy is an inventory management system that generally works for the small business to be
carried out. It’s the value of the material which the company will buy during a certain period of time.
In other words, we can say that it is the value of inventory that one may need to buy in order the
meet the demand and supply in market and also to keep a positive cashflows in the company. In
other words, it means to buy the raw material as required in order to meet the demand of customer.
(Hudson, 2019)
In question number 1 projected sales is computed through dividing the sales made through sales
curve % figure. Sales to be made figure is arrived by subtracting sales made from projected sales
(assumed) figure to arrive at sales to be made. The value on hand and on order figure is already
given. Open to buy figure is calculated after subtracting on hand and on order from sales to be made
to arrive at the final figure.
Answer 2&3
Inventory
February March
Cost ($) Retail ($) Cost ($) Retail ($)
Beginning inventory 30,000 59,600 18,688 36,861
Gross purchases 1,25,000 2,36,642 1,52,622 3,11,673
Returns to suppliers 1,600 2,440 3,642 7,400
Shipping 652 1,237 772 1,577
Transfers received 956 1,824 552 1,016
Gross sales 129208 2,46,422 105704 2,15,000
Customer returns 5989 11,422 8850 18,000
Markdowns 10487 20,000 14258 29,000
Cancelled markdowns 275 525 548 1,114
Employee discounts 641 1,223 507 1,032
Cash discounts 4,622 8,815 3,281 6642.88
Alterations 488 931 752 1522.54
EOM 20,936 41,165 57,920 1,17,809
Normal Loss 2247.6 4304.5 840 3,809
Physical inventory 18,688 36,861 57,080 1,14,000

In the above analysis physical inventory is computed for the month of February and march is
computed by subtracting normal loss of inventory from EOM .The EOM figure is arrived at by
addition of beginning inventory ,gross purchases, return to suppliers, shipping ,transfer received,
cancelled markdowns and customer returns and subtracting therefrom gross sales, markdowns and
employee discounts. The Gross sales of both the month is arrived at by addition of (beginning
inventory, gross purchases, shipping and transfer received and subtracting there from return to
suppliers) and by multiplying gross sales divided by (beginning inventory +gross purchases transfer
received-return to suppliers).
Answer 4
February March
Cost value Retail
value
Profit
margi
n
%
Cost value Retail
value
Profit
margi
n
%
Beginning
inventory 30,000 59,600 98.67% 18,688 36,861 97.24%
Additions to
inventory
Purchases 1,23,400 2,34,202 89.79% 1,48,980 3,04,273 104.24%
Shipping 652 1237 89.79% 3,642 1,577 -56.71%
Price increase
Net transfers 956 1,824 90.79% 772 1,016 31.61%
Total additions 1,25,008 2,37,263 89.80% 1,53,394 3,06,866 100.05%
Total available
for sale 1,55,008 2,96,863 91.51% 1,72,082 3,43,727 99.75%
Average cost
% / Initial
margin
Average
cost %
Initial
margi
n
%
Average
cost %
Initial
margin
%
Subtractions
to inventory
All
subtractio
ns
are made
using
their
retail
value
only!
All
subtractio
ns
are made
using
their
retail
value
only!
Net sales 235000 1,97,000
Net markdowns 19475 27,886
Employee
discounts 1223 1,032
Total
subtractions 2,55,698 2,25,918
EOM inventory 20,936 41,165 1,72,082 1,17,809
revision for
loss 2248 4305 840 3,809
Estimated
physical
inventory on
March 31 18,688 36,861 57,080 1,14,000

Gross cost of
goods sold 1,36,320 2,60,003 1,15,002 2,29,727
Alteration cost 488 931 752 1522.536543
Cash discounts 4,622 8,815 3,281 6,643
Total cost of
goods sold 1,32,186 2,52,118 1,12,473 2,24,606
Total Cost of Good sold is computed by adding Gross Cost of Goods Sold and alteration cost and
subtracting therefrom Cash discounts given to customers. The Gross cost of goods sold is computed
by subtracting estimated physical inventory in the month of march from total available for sale. The
estimated physical inventory in the month of march is computed by subtracting provision for loss
from EOM inventory. The total available for sale is computed by addition of total sales i.e. total
additions plus beginning inventory of material. For both the month February and March the
calculation is done in the similar pattern.
References
Hudson, M. (2019, October 8). Open-to-Buy Planning for Retailers. Retrieved from
www.thebalancesmb.com: https://www.thebalancesmb.com/open-to-buy-planning-
2890318