Accounts receivable, inventory, and total quality management

Accounts Receivable, Inventory, and Total Quality Management

JOIN KHALID AZIZ
ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM.
FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA.
COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA.
CONTACT:
0322-3385752
R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN.

Determinants of Accounts Receivable
Percent of Credit Sales to Total Sales
Level of Sales
Terms of Sale
Quality of Customer
Collection Efforts
Accounts Receivable Management

Terms of Sale
quoted as a/b net c , which means “deduct a% if paid within b days , otherwise pay within c days .”
example: 3/30 net 60 , means “deduct 3% if paid within 30 days, otherwise pay the entire amount within 60 days.”

Terms of Sale
annualized opportunity cost of foregoing a discount:

Terms of Sale
annualized opportunity cost of foregoing a discount:
a 360
1 - a c - b
x Accounts Receivable Management

a 360
1 - a c - b
opportunity cost of forgoing 3/30 net 60 :
Accounts Receivable Management x

a 360
1 - a c - b
opportunity cost of forgoing 3/30 net 60 :
.03 360
1 - .03 60 - 30
= 37.11%
x x Accounts Receivable Management

Too much inventory is expensive and wasteful.
Not enough inventory can result in lost sales.
Inventory Management

Raw Materials Inventory - basic materials to be used in the firm’s production operations.
Work-in-Process Inventory - partially finished goods requiring additional work before becoming finished goods.
Finished goods Inventory - completed products that are not yet sold.
Stock of Cash - inventory of cash to allow payment of bills.

JOIN KHALID AZIZ
ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM.
FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA.
COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA.
CONTACT:
0322-3385752
R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN.

Optimal inventory order size: the Economic Order Quantity (EOQ) model :

Optimal inventory order size: the Economic Order Quantity (EOQ) model:
2SO
C
Q* = Inventory Management

Q = inventory order size in units
C = cost of carrying 1 unit in inventory
S = total demand in units over planning
period
O = ordering cost per order
2SO C Inventory Management Q* =

Q = inventory order size in units
C = cost of carrying 1 unit in inventory = 1.25
S = total demand in units over planning
period = 10,000 units
O = ordering cost per order = $250
Example: Inventory Management 2SO C Q* =

2SO
C
Example: Inventory Management Q* =

2SO
C
2 x 250 x 10,000
1.25
Q* = Example: Inventory Management Q* =

2SO
C
2 x 250 x 10,000
1.25
= 2,000 units
Q* = Example: Inventory Management Q* =

Average EOQ
inventory 2
Order Point Problem = + safety stock

Total Quality Management : a company-wide systems approach to quality.
An effort to increase quality through better supplier relations.
Interdependence between supplier and customer allows for development of new, better products.
TQM

ATTENTION COMMERCE STUDENTS
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
http://finance.groups.yahoo.com/group/cost-accountants

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Accounts receivable, inventory, and total quality management

by Khalid Aziz on Nov 21, 2011

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