Consider two employers and their respective optimal turnover policies. The first
ID: 2494915 • Letter: C
Question
Consider two employers and their respective optimal turnover policies. The first is an architectural firm that designs skyscrapers. To win a client for a particular job, it must submit designs and be selected as the top candidate. The firm only gets business if it has the winning design. The second is a large chain of department stores that hire retailers to work the cash register and make clothing recommendations for customers based on the store’s current inventory. a) Which employer should aim for relatively high turnover? Give at least two reasons to support your claim. b) Which employer should aim to reduce turnover? Give at least two reasons why.
Explanation / Answer
"In accounting, turnover often refers to inventory or accounts receivable."
Architectural firm should try to reduce the turnover. Because in case of architectural firm, inventory costs are substantially higher compared to department stores. Also, if inventory is high they will not be able to fund their new projects.
Department stores can have high inventory because, demand is seasonal and non-uniform. And the cost of losing a business is higher than cost of inventory.