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3... inventory and need of inentory version 2003


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3... inventory and need of inentory version 2003

  2. 2. INTRODUCTION• Control and maintenance of inventory of physical goods is common to all enterprises.• Inventory aid in increasing production rate and lowering manufacture cost.• For manufacturing firms, inventory accounts for a large percentage of working capital.• Managing independent demand based on its own usage history and statistical variation.
  3. 3. DEFINITION OF INVENTORY Stock or Store of Goods maintain onhand at or near a business`s location to meetdemand and fulfill its reason for existence ina firm
  4. 4. According to International Accounting Standard: 2(IAS:2) Inventory as tangible property which is,a) Held for sale in the ordinary course of businessb) In the process of production for such salec) To be consumed in the production of goods or service for sale
  5. 5. TYPES OF INVENTORYa) Necessary for the functioning of the firmb) Different types based on different sectors in the firmc) Merchandising Inventory and Manufacturing Inventory
  6. 6. RAW MATERIALa) Basic material used in manufacturing firm for the production of product.b) Purpose of maintaining raw material inventory-is to uncouple, the production function from the purchasing function.c) Examples- leather,dyes,snaps,
  7. 7. STORES AND SPARESa) Products which are accessories to the mainproduct produced for the purpose of sale.b) Eg-bolts,nuts,clarps,screw etc.c) These are bought from outside or they aremanufactured in the company.
  8. 8. WORK IN PROCESSa) Materials and components have been committed to the production processb) Purpose is to uncouple the various operations in the productive processc) It includes all the raw material in various stages of developmentd) Eg- labour,rawmaterial.
  9. 9. FINISHED GOODSa) Completed products awaiting saleb) Purpose is to complete the production and sales functionc) Consists of cost of raw material, labor and manufacturing overhead for the entire product
  10. 10. a) Buffer inventory :-Compensate - uncertainties in supply and demand. Finished goods.a)Cycle inventory:- Available inventory.Occurs because the one or more stages in the operation are not able to supply all goods,they produce simultaneouslyb)Anticipation inventory:-Building up extra stock for periods of increase demandc) Pipeline inventory:- Goods still in transit or in the process of distribution have left the factory but not arrived .
  11. 11. NEED OF INVENTORY a) Smooth out gaps in the rate or timing of demand and supplyb) Meet unexpected demandc) Meet variations in demandd)Hedge against price increasese)Quantity price increasef) Long lead and high demand items
  12. 12. CONCLUSIONa) All organisation keep inventories in smaller or larger scaleb) Holding inventories help the companies remain independent and free from render dependencies