A regional manager for a chain of auto parts stores visits one of the stores in the chain. He looks in the store's warehouse and finds about 100 cases of motor oil that have been sitting in the warehouse for over one year. Upon inspection, he finds that in each case, one of the twelve cans of oil has leaked, thus soaking through the box and making the case unfit for sale. The regional manager instructs the store manager to unpack all of the cases, discard the leaking cans, clean up the remaining cans, and to contact the oil company for new boxes. He tells the store manager to repackage the remaining cans in the new boxes and to sell the cases to customers at the retailer's cost with no added markup. He explains to the store manager that moving this inventory will not result in immediate profit, but that it will benefit the store by improving the:
A) Markup.
B) Markup rate.
C) Markup percent.
D) Stockturn rate.
E) Break-even point.

Question

Quizplus · Accepted Answer

The decision to sell the remaining cans at the retailer's cost with no added markup means that the store will not make any immediate profit from this inventory. However, by removing the damaged cans, repackaging the remaining inventory, and selling it at cost, the store is improving its stockturn rate. This means that the store is able to sell its inventory more quickly and efficiently, which can ultimately lead to increased profits in the long run.

A Regional Manager for a Chain of Auto Parts Stores