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Triple Creek Hardware: Strength of a Perpetual Inventory System

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Triple Creek Hardware Store currently uses a periodic inventory system. Kevin Carlton, the owner, is considering the purchase of a computer system that would make it feasible to switch to a perpetual inventory system.
Kevin is unhappy with the periodic inventory system because it does not provide timely information on inventory levels. Kevin has noticed on several occasions that the store runs out of good-selling items, while too many poor-selling items are on hand. Kevin is also concerned about lost sales while a physical inventory is being taken.
Triple Creek Hardware currently takes a physical inventory twice a year. To minimize distractions, the store is closed on the day inventory is taken. Kevin believes that closing the store is the only way to get an accurate inventory count.

Will switching to a perpetual inventory system strengthen Triple Creek Hardware's control over inventory items? Will switching to a perpetual inventory system eliminate the need for a physical inventory count? Explain.

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Solution Summary

There are three issues mentioned (below). The change in method will be discussed for each of these individually.

Timely information
Closing of store during counts
Control over items

The discussion explains why counts would still be needed.

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Will switching to a perpetual inventory system strengthen Triple Creek Hardware's control over inventory items?

There are three issues mentioned (below). The change in method will be discussed for each of these individually.

Timely information
Closing of store during counts
Control over items

(1) Timely information

Perpetual systems update every time there is a sale, leaving current counts by-product in real time. With periodic systems, the count at the beginning of the month stays on the books until the end of the ...

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