A distinctive feature of planning inventory levels and purchasing is that the plans are first developed in terms retail prices. Next, there is a conversion from retail price to purchase cost This means that since sales are planned at retail prices, the BOM stock levels are planned at retail. Because the BoM inventory for one month is the EOM inventory for the preceding month, planning focuses on sales and the BOM stock (inventory) level each month. Planning and controlling inventory levels are continuing and critical problems When sales and stock requirements have been projected, purchase require ments can be computed as a residual quantity