Comment on these two statements.

Chapter 6 - Explain why it is sometimes best to sell inventory for less than the amount paid for it.

All companies no matter if manufacturing or retail are thriving to have higher inventory turnover, which correlates directly with the ability to generate cash, as it is one of the main determinants of cash conversion cycle, as a measure of a companys management and overall health of a company (Investopedia, 2017). Inventory that is sitting on the shelf has historical costs, which may no longer be relevant for current business situation. By selling inventory for a less than amount paid for it, scarce resources are freed up to be used the most efficient way, such as warehouse space and cash is available for new purchases (Horngren, Sundem, Schatzberg & Burgstahler, 2014). As I am working for the company, which is a large distributor of electronic components, due to the nature of product, I often see how important it is to write off aging inventory or slow moving inventory, one sitting on the shelves with no sales. One of the methods used is to average costs of the inventory, so if the old inventory was procured at higher historical cost, which is no longer relevant, the cost to get new inventory of the same item is taken into consideration when lowering the historical cost of old inventory, in this case to the average level.

Chapter 8 - Who is usually responsible for sales-activity variances? Why?

According to Horngren, Sundem, Schatzberg & Burgstahler, marketing managers usually have the primary responsibility for reaching the sales level specified in the static budget (2014, p.317). As sales activity variance is the difference in between planned static budget and flexible budget amount, when the sales is cost driver, marketing or sales managers are usually the ones who are responsible for sales-activity variances. First place, usually, they are the ones who define the amount of static budgets, but at the same time they are the most competent to analyze different sources of variations, such as poor quality, missed schedules, unfavorable market conditions or unrealistically set initial budgets.