Quitman, Inc., keeps a perpetual merchandise inventory. A new member of the board of directors notices that two employees work full time keeping the inventory records. The director suggests that the corporation stop using the perpetual inventory system and take a periodic inventory once a year when information is needed for financial statements.

The director also suggests that the salaries saved by eliminating the positions of the two inventory employees will be more than the cost of an annual periodic inventory. What is your opinion of this suggestion? Explain your answer.