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EX 7-2 Control of inventories

Lincoln Luggage Shop is a small retail establishment located in a large shopping mall. This shop has implemented the following procedures regarding inventory items:

a. Since the shop carries mostly high-quality, designer luggage, all inventory items are tagged with a control device that activates an alarm if a tagged item is removed from the store.

b. Since the display area of the store is limited, only a sample of each piece of luggage is kept on the selling floor. Whenever a customer selects a piece of luggage, the salesclerk gets the appropriate piece from the store’s stockroom. Since all salesclerks need access to the stockroom, it is not locked. The stockroom is adjacent to the break room used by all mall employees.

c. Whenever Lincoln receives a shipment of new inventory, the items are taken directly to the stockroom. Lincoln’s accountant uses the vendor’s invoice to record the amount of inventory received.

State whether each of these procedures is appropriate or inappropriate. If it is inappropriate, state why.