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As you asked, we reviewed the circumstances surrounding the inventory that was missed during the November, 2002 year end physical inventory observation and the resultant change in the variance between perpetual inventory records and the physical inventory for the Middletown plant. This letter summarizes our findings. Background The Middletown plant receives batteries, removes plastic and waste, and processes the metal through their smelting operation. “Verb Lead” is separated from “Slag.” Since the Middletown plant does not have the capability to fully process the Slag, it is sent to RSR’s Indianapolis plant, which has more extensive processing capabilities using its Electro Furnace. Slag is sent from Middletown to Indianapolis via railcar and is weighed prior to shipment. Perpetual inventory records are updated upon shipment. After the Indianapolis plant processes the Slag through its Electro Furnace, “EF Metal” is shipped back to Middletown. (Note that the Indianapolis plant commingles the Slag from their operation with Middletown’s Slag. Therefore, the EF Metal returned to Middletown is not simply a function of the slag previously sent.) EF Metal is sent from Indianapolis to Middletown via railcar and is weighed prior to shipment. Perpetual inventory records are updated upon shipment.
Approximate Word count = 764
Approximate Pages = 3.1
(250 words per page double spaced)
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