Inventory Controls Highland Manufacturing produces overhead conveyer systems and has in inventory at any given time more than $2,000,000 of equipment ready for delivery. Highland stores its inventory in a covered and fenced yard with no other security systems. Soundbox Stereo Corporation produces stereo systems for owner installation in automobiles and normally has $600,000 of completed stereo systems in inventory. Soundbox stores its inventory in buildings that are locked at night and have elaborate alarm systems. In addition, employees are required to wear company uniforms while at work and must change to street clothes be- fore leaving work.

a. What factors may dictate the need for different security and control systems for the protection of inventory in the two companies? Why does Soundbox feel the need to lock its building and have an alarm system while Highland does not? Why does Soundbox require its employees to wear company uniforms at work and change into street clothes before leaving?

b. Both companies also receive large amounts of direct cash payments from customers. What controls should the companies have in place to ensure that cash is not stolen?

c. How does the use of a perpetual inventory system assist companies in determining whether inventory theft has occurred?