Vendors give on consignment as versus oxygen

Reference no: EM133650389

Question

"Inventory valuation overstocked product example: Q-tips-100 boxes of Q-tips that represent $2000. The inventory turnover has a low-value rate for q tips and that represents overstocking. Now Q-Tips will not expire and there is not a situation that would arise where a vast amount of Q-Tips would be needed. If a hurricane or earthquake hits there are more than enough Tips. One box of Q tips is on automatic reorder at $20 a box. A closer evaluation is that an average of 1 Q tip is used a day, and each box has 100 so a box is used roughly about every three months. Therefore, there are enough boxes in the inventory for 36 months, and $20 is now cut from the inventory with a future savings of $720. Tips are not an item that vendors give on consignment as versus Oxygen. We pay for oxygen as it is used so it is not money sitting on a shelf or in a box."

Reference no: EM133650389

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