Periodic Inventory System Formula

Oct 13, 2025 by magicalceylontours.com 8 views

REI's Snowboard Sales: A Periodic Inventory System Analysis

REI, a renowned outdoor recreation retailer, has been selling snowboards to enthusiasts during the month of September. As part of their inventory management system, REI uses a periodic inventory system to track their snowboard sales and inventory levels. In this article, we will delve into the details of REI's snowboard sales during September, analyzing the data and providing insights into their inventory management practices.

According to the data provided, REI sold a total of 102 snowboards during the month of September. This is a significant number, indicating a high demand for snowboards during this period. To better understand the sales trends, let's break down the sales data by date.

Sales Data

Date	Quantity Sold
September 1	5
September 5	10
September 10	8
September 15	12
September 20	15
September 25	20
September 30	32

As we can see from the sales data, the quantity sold increases steadily throughout the month, with a significant spike on September 30. This suggests that there may be a strong demand for snowboards towards the end of the month.

REI uses a periodic inventory system to manage their snowboard inventory. This system involves counting the inventory at regular intervals, usually at the end of each month, to determine the quantity of snowboards on hand. The periodic inventory system is used to calculate the cost of goods sold (COGS) and the ending inventory balance.

Periodic Inventory System Formula

The periodic inventory system formula is as follows:

Ending Inventory Balance = Beginning Inventory Balance + Net Purchases - Cost of Goods Sold

Where:

Beginning Inventory Balance is the quantity of snowboards on hand at the beginning of the month
Net Purchases is the total quantity of snowboards purchased during the month
Cost of Goods Sold is the total cost of snowboards sold during the month

Calculating Ending Inventory Balance

To calculate the ending inventory balance, we need to know the beginning inventory balance, net purchases, and cost of goods sold. Let's assume that the beginning inventory balance is 50 snowboards, and the net purchases during the month are 150 snowboards.

Cost of Goods Sold = Quantity Sold x Unit Cost = 102 x $500 = $51,000

Net Purchases = Beginning Inventory Balance + Net Purchases = 50 + 150 = 200

Ending Inventory Balance = Beginning Inventory Balance + Net Purchases - Cost of Goods Sold = 50 + 200 - 51,000 = -49,850

As we can see from the calculation, the ending inventory balance is negative, indicating that REI has sold more snowboards than they have in stock. This suggests that REI may need to restock their snowboard inventory to meet the demand.

In conclusion, REI's snowboard sales during September were significant, with a total of 102 snowboards sold. The sales data suggests a strong demand for snowboards towards the end of the month. REI's use of a periodic inventory system allows them to manage their snowboard inventory effectively, but the negative ending inventory balance indicates that they may need to restock their inventory to meet the demand. By analyzing the sales data and inventory levels, REI can make informed decisions about their inventory management practices and ensure that they have the right products in stock to meet customer demand.

Based on the analysis, we recommend that REI:

Restock their snowboard inventory to meet the demand
Analyze the sales data to identify trends and patterns
Adjust their inventory management practices to ensure that they have the right products in stock to meet customer demand
Consider implementing a just-in-time inventory system to reduce inventory levels and minimize waste

By following these recommendations, REI can improve their inventory management practices and ensure that they have the right products in stock to meet customer demand.
REI's Snowboard Sales: A Periodic Inventory System Analysis - Q&A

In our previous article, we analyzed REI's snowboard sales during September, using a periodic inventory system to track their sales and inventory levels. We also calculated the ending inventory balance, which indicated that REI may need to restock their snowboard inventory to meet the demand. In this article, we will answer some frequently asked questions (FAQs) related to REI's snowboard sales and inventory management practices.

Q: What is a periodic inventory system?

A: A periodic inventory system is a method of tracking inventory levels and sales data at regular intervals, usually at the end of each month. This system involves counting the inventory on hand, calculating the cost of goods sold, and determining the ending inventory balance.

Q: How does a periodic inventory system work?

A: A periodic inventory system works by counting the inventory on hand at the beginning of the month, adding the net purchases during the month, and subtracting the cost of goods sold. The resulting ending inventory balance is used to determine the quantity of inventory on hand at the end of the month.

Q: What is the difference between a periodic inventory system and a perpetual inventory system?

A: A perpetual inventory system is a method of tracking inventory levels and sales data in real-time, whereas a periodic inventory system is a method of tracking inventory levels and sales data at regular intervals. Perpetual inventory systems are more accurate and up-to-date, but they require more resources and technology to implement.

Q: Why is it important to manage inventory levels effectively?

A: Managing inventory levels effectively is important because it helps to ensure that the right products are in stock to meet customer demand, reduces waste and excess inventory, and improves cash flow. Effective inventory management also helps to reduce the risk of stockouts and overstocking, which can lead to lost sales and revenue.

Q: How can REI improve their inventory management practices?

A: REI can improve their inventory management practices by implementing a just-in-time inventory system, which involves ordering and receiving inventory just in time to meet customer demand. They can also use data analytics and forecasting tools to predict sales trends and adjust their inventory levels accordingly.

Q: What are some common challenges associated with inventory management?

A: Some common challenges associated with inventory management include stockouts, overstocking, inventory obsolescence, and inventory shrinkage. These challenges can be mitigated by implementing effective inventory management practices, such as just-in-time inventory systems and data analytics.

Q: How can REI use data analytics to improve their inventory management practices?

A: REI can use data analytics to improve their inventory management practices by analyzing sales data, customer behavior, and market trends. They can also use data analytics to predict sales trends and adjust their inventory levels accordingly.

In conclusion, REI's snowboard sales during September were significant, and their use of a periodic inventory system helped to track their sales and inventory levels effectively. However, the negative ending inventory balance indicates that they may need to restock their inventory to meet the demand. By implementing effective inventory management practices, such as just-in-time inventory systems and data analytics, REI can improve their inventory management practices and ensure that they have the right products in stock to meet customer demand.

Based on the analysis, we recommend that REI:

Implement a just-in-time inventory system to reduce inventory levels and minimize waste
Use data analytics and forecasting tools to predict sales trends and adjust their inventory levels accordingly
Analyze the sales data to identify trends and patterns
Adjust their inventory management practices to ensure that they have the right products in stock to meet customer demand

By following these recommendations, REI can improve their inventory management practices and ensure that they have the right products in stock to meet customer demand.