The president of National Wholesalers suspected that employees are stealing several items of merchandise, particularly items that are small enough to hide in clothing. The president's suspicions resulted from complaints made in April by several retailers who claimed that shortages were frequently found when orders of financial and programmable calculators were inspected upon receipt.

The assistant controller was asked to provide whatever information might prove helpful in identifying the extent of any problem that might have developed since the end of the previous fiscal year on December 31. The following report was submitted on May 1.

Required:
1. Compute the number of units of each type of merchandise that are unaccounted for on May 1. The company uses a periodic inventory system and the weighted-average inventory costing method.

2. Determine the monetary value of the apparent loss.
3. Assuming that the apparent loss realized during the period January 1-April 30 is representative of the loss that might be realized on these two items during an entire year, would you recommend that

(a) a new inventory system be installed in the warehouse at an annual cost of \(\$ 4,000\) to maintain perpetual inventory records of these two items of merchandise and

(b) a quarterly physical inventory count of these items be implemented at an additional cost of \(\$ 1,000\) per quarterly count? Show supporting computations.

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Financial Calculators Programmable Calculators Number of units in inventory on December 31, per physical count Cost per unit Number of units purchased since January 1: January February March 19,600 7,600 $ 8.40 $ 29.25 4,200 1,400 3,600 3,100 5,100 2,700 April Total 2,700 1,800 15,600 9,000 Average cost per unit of purchases since January 1 $ 8.40 $30.00 Average gross profit percentage on merchandise billed to retailers Sales recorded from January 1 to April 30 30% 25% $343,200 $496,400 Number of units physically counted in the warehouse on April 30 6,400 3,900