Inventory Management Part II
•Download as PPTX, PDF•
0 likes•20 views
Basics of Inventory Management for SMEs Part II
Recommended
More Related Content
Similar to Inventory Management Part II
Similar to Inventory Management Part II (20)
More from Mustansir Shabbar Choonawala
Recently uploaded
Recently uploaded (20)
Inventory Management Part II
- 2. 2 WHAT IS INVENTORY & ITS MANAGEMENT? 1. Inventory or stock is the goods and materials that a business holds for the ultimate goal of resale to make money. 2. Inventory management or control is a discipline primarily about specifying the shape and placement of stocked goods.
- 3. 3 THREE MAIN ASPECTS OPTIMUM LEVEL CONTROL PERFORMANCE VALUATION
- 4. 4 MARATHON Q’s HOW I VALUE MY INVENTORY? SECOND… DEAD STOCKS
- 5. 5 INVENTORY VALUATION Inventory Valuation is the monetary amount associated with the goods in the inventory. It allows you to evaluate your Cost of Goods Sold (COGS) and, ultimately, your profitability. Inventories are the largest current business assets. The valuation is based on the costs incurred to acquire the inventory and get it ready for sale.
- 6. 6 BASIC INVENTORY FORMULA Every entrepreneur must know… OPENING INVENTORY XXX ADD: PURCHASES XXX AVAILABLE FOR SALE XXXX LESS: COST OF GOODS SOLD (XXX) CLOSING INVENTORY XXX
- 7. 7 INVENTORY VALUATION METHODS Specific Identification Method First-In First-Out Method – FIFO Last-In First-Out Method – LIFO Weighted Average Cost – WAC
- 8. 8 WORKING EXAMPLE 1. Opening Inventory 27 pcs @ Rs. 15/- each. 2. Purchase of 40 pcs @ Rs. 10/- each. 3. Sale of 50 pcs @ Rs. 25/- each. 4. Purchase of 70 pcs @ Rs. 20/- each. 5. Purchase of 25 pcs @ Rs. 21/- each. 6. Sale of 70 pcs @ Rs. 30/- each. 7. Sale of 30 pcs @ Rs. 35/- each. Calculate COGS and Closing Inventory
- 9. 9 CALCULATION FIFO METHOD Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total 1-Oct 27 15 405 2 40 10 400 27 15 405 40 10 400 3 27 15 405 17 10 170 23 10 230 4 70 20 1,400 17 10 170 70 20 1,400 5 25 21 525 17 10 170 70 20 1,400 25 21 525 6 17 10 170 17 20 340 53 20 1,060 25 21 525 7 17 20 340 12 21 252 13 21 273 - Purchases 2,325 COGS 2,478 Ending Inv. 252 Date Purchases Sales Balance
- 10. 10 CALCULATION LIFO METHOD Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total 1-Oct 27 15 405 2 40 10 400 27 15 405 40 10 400 3 40 10 400 17 15 255 10 15 150 4 70 20 1,400 17 15 255 70 20 1,400 5 25 21 525 17 15 255 70 20 1,400 25 21 525 6 25 21 525 17 15 255 45 20 900 25 20 500 7 25 20 500 12 15 180 5 15 75 - Purchases 2,325 COGS 2,550 Ending Inv. 180 Date Purchases Sales Balance
- 11. 11 CALCULATION WAC METHOD Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total 1-Oct 27 15 405 2 40 10 400 27 15 405 40 10 400 3 40 10 400 17 15 255 10 15 150 4 70 20 1,400 17 15 255 70 20 1,400 5 25 21 525 17 15 255 70 20 1,400 25 21 525 6 25 21 525 17 15 255 45 20 900 25 20 500 7 25 20 500 12 15 180 5 15 75 - Purchases 2,325 COGS 2,550 Ending Inv. 180 Date Purchases Sales Balance
- 12. 12 VERIFICATION FIFO VS. LIFO VS. WAC FIFO LIFO WAC Opening Inventory 405 405 405 Add: Purchases 2,325 2,325 2,325 Available for Sale 2,730 2,730 2,730 Less: Cost of Goods Sold (2,478) (2,550) (2,502) Ending Inventory 252 180 228
- 13. 13 PROFIT & LOSS ACCOUNT FIFO VS. LIFO VS. WAC FIFO LIFO WAC Sales 4,400 4,400 4,400 Less: Cost of Goods Sold (2,478) (2,550) (2,502) Gross Profit 1,922 1,850 1,898
- 14. 14 COMPARISON FIFO VS. LIFO VS. WAC METHOD COGS END. INV PROFIT FIFO 2,478 252 Increase LIFO 2,550 180 Decrease WAC 2,502 228 Moderate
- 15. 15 PROFIT RELATION PROFITABILITY IS Directly Proportional Inversely Proportional Ending Inv COGS
- 16. 16 FINAL WORD… WELCOME THE FUTURE OF TECHNOLOGY
- 18. 18 ANY QUESTIONS Q / A ?
- 19. 19 THANK YOU
- 20. 20 SINGLE ITEM COST / VALUATION LANDED COST MODEL Generate PO Vendor Send Ship to Vendor Terminal Your Terminal Custom Charge Clearance Insurance + Freight Charges Transpor tation Local Warehouse TOTAL COST