Accounts Receivable, Inventory, and Total Quality Management
JOIN KHALID AZIZ <ul><li>ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM. </li></ul><ul><li>FINANCIAL ACCOUNTING OF ICMAP ST...
<ul><li>Determinants of Accounts Receivable </li></ul><ul><li>Percent of Credit Sales to Total Sales </li></ul><ul><li>Lev...
<ul><li>Terms of Sale </li></ul><ul><li>quoted as  a/b net c  , which means “deduct  a%  if paid within  b days , otherwis...
<ul><li>Terms of Sale </li></ul><ul><li>annualized opportunity cost of foregoing a discount: </li></ul>Accounts Receivable...
<ul><li>Terms of Sale </li></ul><ul><li>annualized opportunity cost of foregoing a discount: </li></ul><ul><li>a  360 </li...
<ul><li>a  360 </li></ul><ul><li>1 - a  c  -  b </li></ul><ul><li>opportunity cost of forgoing  3/30 net 60 : </li></ul>Ac...
<ul><li>a  360 </li></ul><ul><li>1 - a  c  -  b </li></ul><ul><li>opportunity cost of forgoing  3/30 net 60 : </li></ul><u...
<ul><li>Too much inventory is expensive and wasteful. </li></ul><ul><li>Not enough inventory can result in lost sales. </l...
<ul><li>Raw Materials Inventory  - basic materials to be used in the firm’s production operations. </li></ul><ul><li>Work-...
JOIN KHALID AZIZ <ul><li>ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM. </li></ul><ul><li>FINANCIAL ACCOUNTING OF ICMAP ST...
<ul><li>Optimal inventory order size: the  Economic Order Quantity (EOQ) model : </li></ul>Inventory Management
<ul><li>Optimal inventory order size: the Economic Order Quantity (EOQ) model: </li></ul><ul><li>2SO </li></ul><ul><li>C <...
<ul><li>Q =  inventory order size in units </li></ul><ul><li>C =  cost of carrying 1 unit in inventory </li></ul><ul><li>S...
<ul><li>Q =  inventory order size in units  </li></ul><ul><li>C =  cost of carrying 1 unit in inventory  = 1.25 </li></ul>...
<ul><li>2SO </li></ul><ul><li>C </li></ul>Example:  Inventory Management Q*  =
<ul><li>2SO </li></ul><ul><li>C </li></ul><ul><li>2 x 250 x 10,000 </li></ul><ul><li>1.25  </li></ul>Q*  = Example:  Inven...
<ul><li>2SO </li></ul><ul><li>C </li></ul><ul><li>2 x 250 x 10,000 </li></ul><ul><li>1.25  </li></ul><ul><li>=  2,000 unit...
<ul><li>Average   EOQ </li></ul><ul><li>inventory   2 </li></ul>Order Point Problem =  + safety stock
<ul><li>Total Quality Management :  a company-wide systems approach to quality.  </li></ul><ul><li>An effort to increase q...
ATTENTION COMMERCE STUDENTS <ul><li>ACCOUNTING(FINANCIAL & COST) OF ICMAP STAGE 1,2,3,4  CA..MODULE B,C,D PIPFA (FOUNDATIO...
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Accounts receivable, inventory, and total quality management

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Accounts receivable, inventory, and total quality management

  1. 1. Accounts Receivable, Inventory, and Total Quality Management
  2. 2. JOIN KHALID AZIZ <ul><li>ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM. </li></ul><ul><li>FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA. </li></ul><ul><li>COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA. </li></ul><ul><li>CONTACT: </li></ul><ul><li>0322-3385752 </li></ul><ul><li>R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN. </li></ul>
  3. 3. <ul><li>Determinants of Accounts Receivable </li></ul><ul><li>Percent of Credit Sales to Total Sales </li></ul><ul><li>Level of Sales </li></ul><ul><li>Terms of Sale </li></ul><ul><li>Quality of Customer </li></ul><ul><li>Collection Efforts </li></ul>Accounts Receivable Management
  4. 4. <ul><li>Terms of Sale </li></ul><ul><li>quoted as a/b net c , which means “deduct a% if paid within b days , otherwise pay within c days .” </li></ul><ul><li>example: 3/30 net 60 , means “deduct 3% if paid within 30 days, otherwise pay the entire amount within 60 days.” </li></ul>Accounts Receivable Management
  5. 5. <ul><li>Terms of Sale </li></ul><ul><li>annualized opportunity cost of foregoing a discount: </li></ul>Accounts Receivable Management
  6. 6. <ul><li>Terms of Sale </li></ul><ul><li>annualized opportunity cost of foregoing a discount: </li></ul><ul><li>a 360 </li></ul><ul><li>1 - a c - b </li></ul>x Accounts Receivable Management
  7. 7. <ul><li>a 360 </li></ul><ul><li>1 - a c - b </li></ul><ul><li>opportunity cost of forgoing 3/30 net 60 : </li></ul>Accounts Receivable Management x
  8. 8. <ul><li>a 360 </li></ul><ul><li>1 - a c - b </li></ul><ul><li>opportunity cost of forgoing 3/30 net 60 : </li></ul><ul><li>.03 360 </li></ul><ul><li>1 - .03 60 - 30 </li></ul><ul><li>= 37.11% </li></ul>x x Accounts Receivable Management
  9. 9. <ul><li>Too much inventory is expensive and wasteful. </li></ul><ul><li>Not enough inventory can result in lost sales. </li></ul>Inventory Management
  10. 10. <ul><li>Raw Materials Inventory - basic materials to be used in the firm’s production operations. </li></ul><ul><li>Work-in-Process Inventory - partially finished goods requiring additional work before becoming finished goods. </li></ul><ul><li>Finished goods Inventory - completed products that are not yet sold. </li></ul><ul><li>Stock of Cash - inventory of cash to allow payment of bills. </li></ul>Inventory Management
  11. 11. JOIN KHALID AZIZ <ul><li>ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM. </li></ul><ul><li>FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA. </li></ul><ul><li>COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA. </li></ul><ul><li>CONTACT: </li></ul><ul><li>0322-3385752 </li></ul><ul><li>R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN. </li></ul>
  12. 12. <ul><li>Optimal inventory order size: the Economic Order Quantity (EOQ) model : </li></ul>Inventory Management
  13. 13. <ul><li>Optimal inventory order size: the Economic Order Quantity (EOQ) model: </li></ul><ul><li>2SO </li></ul><ul><li>C </li></ul>Q* = Inventory Management
  14. 14. <ul><li>Q = inventory order size in units </li></ul><ul><li>C = cost of carrying 1 unit in inventory </li></ul><ul><li>S = total demand in units over planning </li></ul><ul><li>period </li></ul><ul><li>O = ordering cost per order </li></ul>2SO C Inventory Management Q* =
  15. 15. <ul><li>Q = inventory order size in units </li></ul><ul><li>C = cost of carrying 1 unit in inventory = 1.25 </li></ul><ul><li>S = total demand in units over planning </li></ul><ul><li>period = 10,000 units </li></ul><ul><li>O = ordering cost per order = $250 </li></ul>Example: Inventory Management 2SO C Q* =
  16. 16. <ul><li>2SO </li></ul><ul><li>C </li></ul>Example: Inventory Management Q* =
  17. 17. <ul><li>2SO </li></ul><ul><li>C </li></ul><ul><li>2 x 250 x 10,000 </li></ul><ul><li>1.25 </li></ul>Q* = Example: Inventory Management Q* =
  18. 18. <ul><li>2SO </li></ul><ul><li>C </li></ul><ul><li>2 x 250 x 10,000 </li></ul><ul><li>1.25 </li></ul><ul><li>= 2,000 units </li></ul>Q* = Example: Inventory Management Q* =
  19. 19. <ul><li>Average EOQ </li></ul><ul><li>inventory 2 </li></ul>Order Point Problem = + safety stock
  20. 20. <ul><li>Total Quality Management : a company-wide systems approach to quality. </li></ul><ul><li>An effort to increase quality through better supplier relations. </li></ul><ul><li>Interdependence between supplier and customer allows for development of new, better products. </li></ul>TQM
  21. 21. ATTENTION COMMERCE STUDENTS <ul><li>ACCOUNTING(FINANCIAL & COST) OF ICMAP STAGE 1,2,3,4 CA..MODULE B,C,D PIPFA (FOUNDATION,INTERMEDIATE,FINAL) ACCA-F1,F2,F3 BBA,MBA B.COM(FRESH),M.COM MA-ECONOMICS..O/A LEVELS KHALID AZIZ…..0322-3385752..kARACHI JOIN GROUP </li></ul><ul><li>http://finance.groups.yahoo.com/group/cost-accountants </li></ul>

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