INVENTORY

Inventory is the total amount of goods and materials contained in a store or factory at any given time
Idle resource having an economic value

CONTENTS
Calculation of Inventory Classification of Inventory Objectives of Inventory Control Functions of Inventory Control

Methods for Controlling Inventories

Cost of Inventory

Inventory Turnover Ratio

Inventory Turnover = Annual Demand Ratio Average Inventory

Contd
Finished Goods

Finished Goods = Cost of produce sold yearly Average Inventory of produce at cost

Supplies

Purchased Parts

Classification of Inventory

Raw Materials
Yearly use of RM Average RM Inventory

RM T/o =

Work in Process

W.I. Process = Cost of Material Average W.I.P

INVENTORY CONTROL
Inventory control concerns with systematic Location, Storage, recording of material to provide the desired quality of service to operating departments at the lowest cost.

OBJECTIVES OF INVENTORY CONTROL

Protection of Stores
Minimizing Loss Correct Valuation Proper use of Funds

Contd
Balancing for Results
Keeping Optimum Inventory Ensures continuity of Supply

FUNCTIONS OF INVENTORY CONTROL

Efficient use of production facilities Protection against fluctuation in Demand
Ensures Flexibility in Manufacturing

Contd
Provides Economical production Purchasing
Facilitate Quick Delivery Earns Quantity Discounts Provides Hedging Facilities

METHODS OF CONTROLING INVENTORY

Variation of Order

Periodic Review of Stock Use of Control Routine

Proforma Bin Card

COST OF INVENTORY
COST OF INVENTORY

ORDERING COST

COST OF CARRYING

ORDERING COST
Purchase Cost
Set-up Cost

COST OF CARRYING INVENTORY

Cost of Investment Storage Taxes Insurance Depreciation Cost Obsolence Cost Stock-out Cost Quantity of Discounts