Professional Documents
Culture Documents
1911 Invetry Mangement 03
1911 Invetry Mangement 03
A
PROJECT REPORT
ON
SUBMITTED TO
SAVITRIBAI PHULE PUNE UNIVERSITY
BATCH 2021-2023
INSTITUTE CERTIFICATE
(To be printed on Institute Letterhead only)
COMPANY CERTIFICATE
(this should be taken on the letter head of organization if you have done it in
organization)
CERTIFICATE
This is to certify that Mr./Miss/Mrs.______________________________________ MBA
student of Sharadchandra Pawar institute of management & research (spimr), someshwarnager
has successfully completed his/her Summer Internship Project titled
______________________________________________________________________________
______________________________________________________________________________
during the period from ___________ to ___________.
During the project he/she was found sincere and obedient.
GUIDE CERTIFICATE
This is to certify that PHUKE ABHIJIT SUNIL
has completed his project satisfactorily on “A Study Of Inventtory Management Morrero Foods
Pvt Ltd” under my guidance.The project work is of original nature and not copied from any other
earlier project work and further no part of it has been submitted to any other University as a
Partial fulfillment of condition for passing any examination.
DECLARATION
Place: - Someshwarnager
Date: - { PHUKE ABHIJIT SUNIL}
ACKNOWLEDGEMENT
INDEX
S.No: CHAPTER PAGE NO.
1. CHAPTER-1 : INTRODUCTION
2. ORGANISATIONAL PROFILE
3. CHAPTER-II : REVIEW OF LITERATURE 07-38
4. CHAPTER-III 68-88
5. CHAPTER-IV 89-93
FINDING
CONCLUSIONS
SUGGESTIONS
BIBLIOGRAPHY
INVENTORY MANAGEMENT
.Stock, stock, beautiful stock
Piles on the fixtures and more in the dock
some of it ancient and some of it new
Alas, and tomorrow another lot’s due.
The couplet beautifully sums up the predicament of all those who are connected with
the stock (inventory). What is this inventory? What are its functions? What can be done to
minimize this inventory? These and other relevant issues have been discussed in this chapter.
Meaning and Definition
The term inventory had been defined by several authors. The more popular of them
are: „the term inventory includes materials – raw, in process, finished packaging, spares and
others stocked in order to meet an unexpected demand or distribution in the future‟.
Another definition of inventory is that it „can be used to refer to the stock on hand at a
particular time of raw materials, goods-in-process of manufacture, finished
products, merchandise purchased for resale, and the like, tangible assets which can be seen,
measured and counted. In connection with financial statements and accounting records, the
reference may be to the amount assigned to the stock of goods owned by an enterprise at a
particular time‟.
Yet another definition is that the term inventory includes the following categories of
items:
1. Production Inventories: Raw material, parts and components which enter the firm‟s
Product in the production process. These may consist of two general types: (a) special
Items manufactured to company specifications, and (b) standard industrial items
Purchased.
2. MRO Inventories: maintenance, repair, and operating supplies which are consumed in the
Production process, but, which do not become part of the product.(e.g. lubricating oil, soap,
machine repair parts).
3. IN-Process Inventories: Semi Finished Products Found At Various Stages In The
Production operation.
4. Finished Goods Inventories: Completed products ready for shipment.
Merchants meant for resale is not included in the above classification of inventories.
The exclusion of merchandise is justified on the ground that a manufacturing establishment
for their conversion into finished products. A trading concern, however, buys finished goods
for resale. The present study is concerned with industrial establishments and not with trading
concerns.
(6) It provides a check against the loss of materials through carelessness or pilferage.
(7) It facilitates cost accounting activities by providing a means for allocating
Material costs to products, departments or other operating accounts.
(8) It enables the management to make cost and consumption comparisons between
Operations and periods.
(9) It serves as a means for the location and disposition of inactive and obsolete items
Of stores.
(10) Perpetual inventory values provide a consistent and reliable basis for preparing
Financial statements.
Inventory Control Techniques
Every industry on average spends 70% on raw materials (inventory). Therefore there
is a need to know the raw material cost and also there is great importance to understand the
inventory management system of this industry.
The study helps a log to various departments to take steps to control the inventory
process. In this competitive business world each and every business organization need
inventory management system for determining what to order, when to order, where and how
much to order so that purchasing and storing costs are the lowest possible without affecting
production and sales. Thus, inventory management control incorporates the determination of
the optimum size of the inventory-how much to be order and when after taking into
consideration the minimum inventory cost.
The overall inventory management includes design and inventory control organization with
proper accountability establishing procedure for inventory handling disposal of scrap,
simplification, standardization and codification of inventories, determining the size of
inventory holdings, maintaining record points and safety stocks, economic order quantity,
EOQ analysis and VALUE analysis and finally framing an INVENTORY MANUAL.
1. To study the inventory management of the Morrero Foods Pvt Ltd, For the
past few years.
2. To analyze this Inventory management with the help of Inventory Analysis as a
principal tool.
3. To evaluate the performance of the company on the basis of these Analysis.
4. To find the trends in figures for the past years.
SCOPE OF STUDY:
The scope of study is limited to collecting the financial data published in the
annual reports of the company with reference to the objectives stated above and an analysis
of the data with a view to suggest favorable solutions to the various problems related to
Inventory Control Management.
This particular topic is selected to the Inventory Control Management is recent
years. The study is conducted to evaluate the performance of the company with reference to
inventory control management. The project is aimed at studying by means of developing
effective „Inventory Control Management ‟
RESEARCH METHODOLOGY
Organizational Profile
1.INTRODUCTION TO THE ORGANISATION
Overview of industry as a whole & Profile of the organization:
Morrero Foods Private Limited is a Private incorporated on 10 November 2017. It is classified as
Non-govt company and is registered at Registrar of Companies, Pune. Its authorized share capital
is Rs. 100,000 and its paid up capital is Rs. 100,000. It is inolved in Production, processing and
preservation of meat, fish, fruit vegetables, oils and fats.
Morrero Foods Private Limited's Annual General Meeting (AGM) was last held on 30 November
2021 and as per records from Ministry of Corporate Affairs (MCA), its balance sheet was last
filed on 31 March 2021.
Directors of Morrero Foods Private Limited are Pankaj Dnyandeo Pawar, Pravin Satish More,
Vinodkumar Dnyandeo More and .
Morrero Foods Private Limited's Corporate Identification Number is (CIN)
U15100PN2017PTC173340 and its registration number is 173340.Its Email address is
vinodmore13111981@gmail.com and its registered address is Plot No 28/2, Shop No. 1&2,
Soham Park Bhigwan Road, MIDC, Baramati Pune Pune MH 413133 IN , - , .
Current status of Morrero Foods Private Limited is - Active.
Registered Address Plot No 28/2, Shop No. 1&2, Soham Park Bhigwan
Road, MIDC, Baramati Pune Pune MH 413133 INDIA
Key Customer 1. Mother dairy Limited
2. Gopalji dairy.
3. Tirumala Tirupati Devasthan- Tirupati
4. Hindustan foods Ltd.
5. Vadilal Industries Ltd.
Director Details
The ability to establish a clear vision, in being proactive with your investments, in
being timely with your undertakings , in being excellent in your execution.
Mission:
High quality, crafted precision, product freshness, careful selection of the finest raw materials,
respect and consideration for our customers: these are Morrero‟s “key words” and values which
have helped make its confectionery well-known and loved by millions of consumers all over the
world. Its products are the result of innovative ideas, and are therefore often inimitable, despite
being widely distributed, and have become part of the collective memory and customs of many
countries, where they are often considered true cultural icons.
REVIEW OF LITERATURE
Inventory is the stock of goods a company uses as raw materials for the process of
production. So there is no doubt in the fact that purchasing inventory - the raw materials - is
pretty much a certainty for the business to operate. There are two basic schools of thought
governing inventory purchase. You can purchase a high amount, fewer times over a year,
avail the economies of scale and then store it in your warehouse. The disadvantage here is
that the company will face warehousing costs, risks of spoilage and wastage and the risk of a
fall in projected demand and therefore a loss. Alternatively, you can buy fewer amounts;
reduce the risk of loss but which means that you have to make your trip to the market more
often. The inventory turnover is the financial management tool which helps the finance
manager establishes the way things stand presently and if there needs to be a change in the
way the company is going about with its policy.
Explaining Inventory Turnover:
The term inventory turnover goes by a number of names like inventory turns, stock turns,
stock turnover, depending on which part of the world you live in. But the basic premise of the
concept remains the same: to find out how many times the inventory 'turns over' within a
specified period. The specified period is a year. Turning over means how many times it
comes into the warehouse of the business and leaves it for the process of production. This
ratio is calculated with the turnover formula in days which supplies the details regarding the
stock turnover.
If the turnover ratio is high, which means that your policy involves buying more times over a
period and consuming, there are a chain of events associated. Purchasing inventory involves
two other costs other than the cost of purchase itself: the cost of holding the inventory
(warehousing) and the cost of delivery. So if you buy less inventory, more times a year, then
you incur a higher delivery cost for the period, because you have to go fetch the stuff a lot
more times. At the same time, you need not have a pretty big warehouse and hence that cost
is lower. Thirdly, having a low inventory means reduced risk of spoilage and wastage and
that lesser company money is locked up in the process.
Purchasing more inventory means reduced aggregate delivery cost since the shipment
perhaps comes only once or twice a year. Warehousing costs will be higher because there is a
lot more stuff to store and hence needs a lot more space. And while there are chances of
losses due to spoilage and the money is locked up, this can be compensated for by the
benefits of economies of scale.
So the desired level of turnover really depends on the company policies. If the business uses a
bulk of foreign made raw materials in its production, it makes little sense to order a tiny
shipment every week or month. Then again, if the raw materials are like to be spoiled, then
Work in progress: The work in progress is that stage of stocks which are in between
raw materials and finished goods. The quantum of work in progress depends upon the
time taken in the manufacturing process. The quantum of work in progress depends
upon the time taken in the manufacturing process. The greater the time taken in
manufacturing, the more will be the amount of work in progress
Consumables: These are the materials which are needed to smoother the process of
production but they act as catalysts. Consumables may be classified according to their
consumption add critically. Generally, consumable stores doe not create any supply
problem and firm a small part of production cost. There can be instances where these
materials may account for much value than the raw materials. The fuel oil may form a
substantial part of cost.
Finished goods: These are the goods, which are ready for the consumers. The stock
of finished goods provides a buffer between production and market, the purpose of
maintaining inventory is to ensure proper supply of goods to customers.
Spares: The stock policies of spares fifer from industry to industry. Some industries
like transport will require more spares than the other concerns. The costly spare parts
like engines, maintenance spares etc., are not discarded after use, rather they are kept
in ready position for further use.
All decisions about spares are based on the financial cost of inventory on such spares
and the costs that may arise due to their non – availability.
market.
3. Risk of Obsolescence: The inventories may become absolute due to
improved technology, changes in requirements, change in customer tastes
etc.
4. Risk Determination in quality: The quality of materials may also
deteriorate while the inventories are kept.
Objects of Inventory Management
Definition of Inventory Management: Inventory Management is concerned
with the determination of optimum level of investment for each components of
inventory and the operation of an effective control and review of mechanism.
The main objectives of inventory management are operational and financial.
The operational objective mean that the materials and spares should be available in
sufficient quantity so that work is not disrupted for want of inventory.
The financial objective means that inventory should not remain idle and minimum
working capital should be locked in it.
b) Re – ordering Level:
When the quantity of materials reaches at a certain figure then fresh order is sent to
get materials again. The order is sent before the materials reach minimum stock level.
Re – ordering level is fixed between minimum level maximum level.
c) Maximum Level:
It is the quantity of materials beyond which a firm should not exceeds its stocks. If the
quantity exceeds maximum level limit then it will be over – stocking.
Overstocking will mean blocking of more working capital, more space for storing the
materials, more wastage of materials and more chances of losses from obsolescence.
And
,
The inventories should first be classified can then code numbers should be assigned
for their identification. The identification of short names are useful for inventory
management not only for large concerns but also for small concerns. Lack of proper
classification may also lead to reduction in production.
Generally, materials are classified accordingly to their nature such as construction
materials, consumable stocks, spares, lubricants etc. After classification the materials are
given code numbers. The coding may be done alphabetically or numerically. The later
method is generally used for coding.
The class of materials is assigned two digits and then two or three digits are assigned
to the categories of items divided into 15 groups. Two numbers will be category of materials
in that class.
The third distinction is needed for the quality of goods and decimals are used to note
this factor.
8) Valuation of inventories – Method of valuation:
FIFO method
LIFO method
Base Stock method
Area of improvement:
Inventory management in India can be improved in various ways. Improvements
could be affected through.
Effective Computerization: Computers should not be used merely for accounting purpose
Companies should develop long term relationship with vendors. This would help in
improving quality and delivery.
Disposal of obsolete / surplus inventories:
Companies should set benchmarks with global competitors and use ideals like JIT to
improve inventory management.
Inventory cost – an overall view:
Introduction:
In financial parlance, inventory is defined as the sum of the value of the raw
materials, fuels and lubricants spare parts maintenance consumable semi – processed
materials and finished goods stock at any giving point of time. The operational definition of
inventory would be amount of raw materials, fuel and lubricants, spare parts and semi –
processed materials to be stock for the smooth running of the plant / industry.
Need of Inventory:
Inventories are maintained basically for the operational smoothness which they can be
affected by uncoupling successive stages of production, whereas the monetary value of the
inventory serves as a guide to indicate the size of the investment made to achieve this
operational convenience. The materials management departments‟ primary function is to
provide this operational convenience with a minimum possible investment in inventories.
Materials department is accused of both stock outs as well a large investment in inventories.
The solution lies in exercise a selective inventory control and application of inventory control
techniques. Inventories build to act as a cushion between supply and demand. It is sufficient
to take care of the requirements of demand till the next supply arrives. It is sufficient to take
care of probable delays in supply as well as probable variations in demand.
The size of the inventory depends upon the factors such as size of industry internal
lead time for purchase, supplier‟s lead time, vendor relations availability of the materials,
annual consumption of the materials. Inventory coat can be controlled by applying Modern
Techniques viz., ABC analysis, SDE, ESN, HMC, VED etc. These techniques can be used
effectively with the help of computerization.
part of unit cost. Thus it would not be difficult to find difference of opinion as to whether
invoice cost includes or excludes cash discount.
When the “current repla Automobial cost” of material on hand at the close of a year is
less than the actual cost, the inventory value is reduced to replaAutomobial cost (current
market price). Thus the acceptable basis inventory valuation is the “lower of cost or market”
or more properly the “lower of actual cost or replaAutomobial cost”.
The determination of inventory values is very important from the point of view of the
balance sheet and the income statement since costs not included in the inventory (the balance
sheet) are considered to be expensive and are thus included in the income statement.
Although the prime consideration in the valuation of inventories is cost, there are a
number of generally accepted methods of determining the cost of inventories at the close of
an accounting period. The most commonly used methods are first – in first out (FIFO)
average, and last – in first – out (LIFO). The selection of the method for determining cost for
inventory valuation is important for it has a direct bearing on the cost of goods sold and
consequently on profit. When a method is selected, it must be used consequently and cannot
be changed for year to year in order to secure the most favorable profit for each year.
III. There are only moderate fluctuations in the prices of materials or goods
purchased.
IV. Materials are easily identifiable as belonging to a particular purchase lot.
stock of materials or finished goods other than the base stock. The base stock
method has advantage of charging out material / goods at actual cost. Its other
merits or demerits will depend on the method which is used for valuing materials
other than the base stock.
Weighted average price method:
This method is based on the presumption that once the materials are put into
a common bin, they lose their identity. Hence, the inventory consists of no specific
batch of goods. The inventory is thus priced on the basis of average priced on the
quantity purchasedat each price.
Weighted average price method is very popular on account of its being based
on the total quantity and value of materials purchased besides reducing number of
calculations. As a matter of fact the new average price is to be calculated only when
a fresh purchase of materials is made in place of calculating it every now and then
as is the case with FIFO, LIFO methods. However, in case of this method different
prices of materials are charged from production particularly when the frequency of
purchases and issues/sales in quite large and the concern is following perpetual
inventory system.
Valuation of inventories – impact on the flow of costs:
As should be quite evident, the different methods of calculating inventory
values will all have their impact on the flow of costs through the balance sheet into the
income statement. The dollars that are paid to acquire inventory are always divided
between the balance sheet (inventories) and the income statement (cost of goods
sold), there is no other place to put them. Thus if the different methods of
calculating inventory produce differing inventory values, they will also produce
differing cost of goods sold figures, and the differing cost of goods sold figures will
naturally produce differing profit figures.
In order show the impact of inventory valuation on cost flows, the preceding
exhibits are summarized. Each method produces a different figure for the transfer of
raw materials to work in process. These differences appear small, but the only reason
for this is that the dollar amounts have been kept small to make the illustration
workable.
With the transfer of materials to work in process, the cost flow or transfer
with have its impact on the work in process inventory and the transfer of completed
merchandise to finished gods. Ultimately when goods are sold; the varying methods
of valuing inventories will have their impact on cost of goods sold and these profits. The
effects of the cost flows on cost of gods sold and profits can be accentuated further it the
differing methods of valuing inventories are applies to work in process and finished goods.
Evaluation of methods – What causes the differences?
The differences in inventory values and flows for each of the method
illustrated result from only one factor, that it, changing purchases prices or unit
costs. If purchase prices had remained stable or unchanged, each method would
have produced the same inventory value and cost flow.
Cost flows and inventory are exactly the same under stable prices. With a
falling price level, the LIFO method produces the highest cost flow and the
lowest inventory. With a falling price level, the LIFO method produces the lowest
cost flow and highest inventory. Thecost flow under LIFO follows the price level,
LIFO produces larger cost flows when prices are rising and smaller cost flows when
prices are falling. A final item to consider is that the average method produces
results which fall between the extremes of LIFO and FIFO. Evaluation of methods
– can we justify the differences?
The best method of inventory valuation might be “specific identification”,
that is, the units in inventory should be identified with the specific invoices and thus
specific unit costs to which they apply.
Fortunately, the FIFO method constitutes a very useful approximation to the
specific identification method if one can reasonably assume that the actual flow of
materials is first-in first-out. This assumption is not unreasonable and thus we have
stated the main argument for the FIFO inventory scheme, that is, the physical flow of
materials would match the flow of costs under the first – in first – out method.
When the units in inventory are identical, interchangeable and do not follow
any specific pattern of physical flow, the average cost system would seen to
appropriate.
The primary difference between the FIFO and average methods is centered
on the physical flow since both methods could involve identical and
interchangeable units. The FIFO method fits a first-in first-out physical flow. The
average method fits a system which has no specific pattern of physical flow. Finding
a situation where there is no specific pattern of physical flow should be quite
difficult because of the fact that most inventory items are subject to deterioration by
instituting a person would attempt to reduce such deterioration and any reasonable
person would attempt to reduce such deterioration by instituting a physical flow
approximating first-in-first-out. The major reason for the use of the average method is
something other than the lack of specific physical flow.
Ordinarily the LIFO method cannot be justified on the basis of the physical flow of
materials. Under conditions of changing prices, the advocate of LIFO says that the only
method which matches costs and revenues is the LIFO method. The LIFO method assumes
that the latest item is the first item out, and thus the current costs of materials are matched
with the other hand, assumes that the first item in is the first item out, and thus the non-
current costs of matching current costs with current revenues is the essence of the argument
for the LIFO method.
As can be seen by the above comments, there is no one best method of valuing
inventories. The method chosen should fit the situation. A physical flow pattern comparable
to FIFO would force one to consider the FIFO method. The lack of a discernible physical
flow pattern would force one to consider the average method. Concentration on cost flows, as
distinct from physical flows, would force to consider the LIFO method especially where there
appears to be a discernible trend towards rising prices (or falling prices) as has been the case
in our economy during recent years.
Inventories valued at standard cost:
A very useful method of valuing inventories is at a standard cost. With a standard cost
system is no need of spending a great deal of time and money tracing unit cost through
perpetual inventory record.
As shown above, there is need only for physical quantities since the inventory
values is the physical quantity multiplied by the standard cost. With the cost and
value columns disposed off, a perpetual inventory card can include additional data
such as quantities on order, quantities reserved, and quantities available. These
additional data are very useful for inventory and production control purpose. On the
basis of a few calculations concerning into inventories on a FIFO, a LIFO, or an
average cost basis.
Inventory of Obsolescence:
Absolvent inventories cannot be used or disposed off at values carried on the books.
Frequent reviews should be made of all inventories, and when obsolescence is
indicated a request for revaluation should be prepared for approval by management.
The difference between original and obsolete value should be recorded by a change
to operating account. Inventory obsolescence, and a credit to inventory. If the
material is scrapped, this will be for the full inventory value or used in areas where
it will be work less than its
Original value, the entry would be only for the amount of write down. Some
companies carry a solvage inventory and transfer to it materials which may be sold
or used at reduced values. Where this is done, the entry would be:
Dr. Solvage inventory
Dr. Inventory Obsolescence‟s. Raw Material inventory or Supplies inventory.
Inventory cost in relation Ultra Tech Cements shall to classifieds follows:
Inventory can be classified as capital and revenue certain items through
titled as capital in nature. Hence, due care is to be take whole drawing the material.
Materials which are to be imported from other countries have to be planned
well inadvance nearly about 24 months are to initiate the proposals for procurement.
Similarly some of the items do not require any lead time some they are
available in the local market.Automobile is highly energy intensive industry, the
inputs like power and Steel are the major part of the variable cost since Government
controls the Steel & fuel sector, and increase is rates adversely effects the
Automobile industry.
Ultra Tech Cements has its own power plant and through which it saves
energy consumption. By this the cost since Government controls the sector, any
increase rates adversely affects the Cement industry.
Sl.
Material Code Department Quantity Unit When Required
No.
PURCHASE DEPARTMENT
ORDER PROCESSING FORM
Material
Sl. Indent
Code Description Size Qty 1 2 3 4 5 6 Remarks
No. Ref
No.
Enter price and other of the quotation received from sub – contractors in
the order processing from.
Mention the earlier purchase details of indented items against each item
in the order processing form if available.
Put up the processing from with enquiry and quotations to head (purchase).
Examine order processing from with decide the sub – contractor to whom
purchase order to be placed.
PURCHASE DEPARTMENT
PURCHASE ORDER
Indent Item
Sl. No. Description Qty Rate Unit Amount
No. Code
PURCHASE DEPARTMENT
AMENDMENT / CANCELLATION OF ORDER
PURCHASE DEPARTMENT
ACTIVITY: IMPORTS:
FLOW CHART:
Receipt of indents for import items from stores department.
Enter price and other terms of the quotations received from overseas supplier in
Examine order processing form and decide the sub – contractor to whom purchase
order to be placed.
Prepare purchase order after finalization of price and other technical terms
mentioning the following details.
1) Material code
2) Indent number
3) Material specification & part number
4) Quantity
5) Rate
6) Payment
7) Insurance and other terms and conditions.
Send the prepared purchase order to head (purchase) and competent authority for
approval.
Send the purchase order to overseas supplier.
Send the purchase order copies to stores and concerned departments.
Prepare IC documents and submit to bank for onward transmission to overseas
supplier.
Receive shipping documents from overseas supplier and send same to clearing
agents for collection of the material.
STORES DEPARTMENT
c) Repairs
d) Block
Checking with P.O. and mentioning Material Code, Party Code, Indent
No.
Department Name on each & every challans.
Creation of D.C. entry in system for general materials.
Preparation of identification tags for General Materials through system.
Preparation of Receipt & Approval Book for General materials.
Manual entry of block, stationery, repairs materials.
Preparation of intimations for block, stationery, repairs materials.
STORES DEPARTMENT
STORES DEPARTMENT
STORES DEPARTMENT
STORES DEPARTMENT
ACTIVITY: EXCISE GATE PASSES
Sending duplicate for transport copy of excise invoice from suppliers delivery
Duplicate for transport copy of excise invoice over to bills section for sending the
Corresponding with supplier. If the Excise Invoice is not found with delivery
challans.
STORES DEPARTMENT
DATA ANALYSIS
MATERIAL ANNUAL CONSUMPTION OF COMPANY
MATERIAL ANNUAL CONSUMPTION OF DAIRY FOR THE YEAR 2018-2019.
= √ 2 * 350000 *992.90
1935.22 * 200
= 21.53(tons)
TOTAL COST = AD * C+ AD * OC + Q * C * I
2 2
AD = ANNUAL DEMAND
OC = ORDERING COST
C = PURCHASING COST
I = INVENTORY CARRING CHARGES.
= 17500000+27000000+6300000
= 86792728(CRORES)
_
EOQ √2 * ANNUAL DEMAND * OREDRING COST
=
= √2 * 1136551 *150
1200 * 200
= 15.38 (tons)
TOTAL COST = AD * C+ AD * OC + Q * C * I
2 2
AD = ANNUAL DEMAND
OC = ORDERING COST
C = PURCHASING COST
I = INVENTORY CARRING CHARGES.
2 2
= 965878 (CRORES)
TOTAL = 7, 85,735
= √ 2 * 785735 *164.17
2384.94* 45.27
= 14.87 (tons)
TOTAL COST = AD * C+ AD * OC + Q * C * I
2 2
2 2
= 193923(CRORES)
= √ 2 * 635489 * 300
150 * 127
= 200.15(tons)
TOTAL COST = AD * C+ AD * OC + Q * C * I
2 2
AD = ANNUAL DEMAND
OC = ORDERING COST
C = PURCHASING COST
I = INVENTORY CARRING CHARGES.
= 55650.76 (CRORES)
41
30
54
INTERPRETATION
1. The total cost incurred in MORRERO FOODS PVT LTD for the last five years is high.
= √ 2 * 291703 * 3674
9000 * 450
= 8429(tons)
TOTAL COST = AD * C+ AD * OC + Q * C * I
2 2
AD = ANNUAL DEMAND
OC = ORD ERING COST
C = PURCHASING COST
I = INVENTORY CHARGES
= √ 2 *187000 * 650
870 * 250
= 890( tons)
TOTAL COST = AD * C+ AD * OC + Q * C * I
2 2
AD = ANNUAL DEMAND
OC = ORDERING COST
C = PURCHASING COST
I= INVENTORY CARRING CHARGES.
= 1300(tons)
TOTAL COST = AD * C+ AD * OC + Q * C * I
2 2
AD = ANNUAL DEMAND
OC = ORDERING COST
C = PURCHASING COST
I =INVENTORY CHARGES
_
2 2
= √2 * 429051 *60.10
150.34 * 550.7
= 2935(TONS)
TOTAL COST = AD * C+ AD * OC + Q * C * I
2 2
AD = ANNUAL DEMAND
OC = ORD ERING COST
C = PURCHASING COST
I = INVENTORY CHARGES
90000000 816900376
80000000
70000000
60000000
total cost
50000000 429450001
40000000
295035102
30000000
20000000
73024200
10000000 1 1 1 1 1 1
0
1
INTERPRETATION
4. The total cost incurred in MORRERO FOODS PVT LTD ltd for the last five years is
high.
Findings
1) All the Years are not showing sample profits. This is because of raw material
prices have been continuously under pressure due to persistent mismatch between
supply and demand.
2) In purchase department for want of any item it should go through several
processes. This may include receiving indents, floating enquiries, preparation of
order processing form, preparation of purchase order and order follow up inform
the supplier. Most of the time was spent in accounts payable.
3) In this type of process, it requires more number of employees and supplier should
also wait for until the accounts are matched.
4) This process takes an input, adds value to it and provides an output to an internal
or external customer.
CONCLUSIONS
Though MORRERO FOODS PVT LTD ltd is doing good in manufacturing many products or
items it was found that a little rectification has to be made
They are
Suggestion
There are many recommendations on purchase of inventory goods depending upon demand ,
they are
1. Company may try to order annually rather than monthly depending upon demand for
the products.
2. Total cost incurred when purchases are made annually is less than the total cost
incurred when orders placed monthly.
4. When orders are made at one time in bulk, then suppliers may provide special
discounts.
BIBLIOGRAPHY
References for the project development were taken from the following books.
R.K. SHARMA SHASHI K.GUPTA : Management accounting
www.google.com
www.wikkipedia.com
www.inventoryindia.com