Periodic or Perpetual, Choose Wisely

Cripple Creek Hardware Store currently uses a periodic inventory system. Hoyt Braxton, the owner, is considering the purchase of a computer system that would make it feasible to switch to a perpetual inventory system. Hoyt is unhappy with the periodic system because it does not provide timely information on inventory levels.

Hoyt has noticed on several occasions that the store runs out of good-selling items, while too many poor-selling are on hand. Hoyt is also concerned about lost sales while a physical inventory is being taken. The store currently takes a physical inventory twice a year. To minimize distractions, the store is closed on the day inventory is taken. Hoyt believes that closing the store is the only way to get an accurate count.

You have been brought in to assess the situation and provide expert advice on which course of action to take—remain with the current periodic inventory system or switch to a perpetual inventory system. Present your findings to Hoyt, discussing whether switching to a perpetual inventory system will strengthen Cripple Creek Hardware's control over inventory items and eliminate the need for a physical inventory count.