Chapter 9 & 10 accounts receivable and inventory management
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This document summarizes key concepts related to accounts receivable and inventory management. It discusses terms of sale, including net payment periods and the opportunity cost of foregoing early payment discounts. It also outlines different types of inventory, including raw materials, work-in-process, and finished goods. The document explains the economic order quantity model for determining optimal inventory order sizes. It provides an example calculation and discusses the concept of order points and safety stock.
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This document discusses key aspects of accounts receivable management, credit analysis, and inventory control. It addresses setting credit policies, analyzing credit applicants, managing the billing and collection process, and following up on overdue accounts. It also outlines the five C's model for credit analysis - character, capacity, capital, collateral, and conditions. Finally, it discusses techniques for inventory control like ABC analysis, economic order quantity models, reorder points, and just-in-time systems. Effective accounts receivable and inventory management requires cooperation across sales, finance, accounting, and other functions.
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The document discusses several accounting concepts:
1) Accounts receivable management is affected by credit sales levels, terms of sale, customer quality, and collection efforts. Terms of sale quote discounts for early payment and penalties for late payment.
2) Inventory management involves balancing raw materials, work-in-process, finished goods, and cash inventories. The economic order quantity model can determine optimal order sizes.
3) Total quality management is a company-wide approach that improves quality through better supplier relations and interdependence between suppliers and customers.
Inventory management
This document discusses inventory management concepts including independent and dependent demand, types of inventories, functions of inventory, objectives and effective inventory management. It also covers inventory models like the single period model and multiple period models including the fixed order quantity and fixed time period models. Key terms discussed include lead time, holding costs, ordering costs, shortage costs. The ABC classification system for inventory is also explained.
Production & Operation Management Chapter21[1]
The document discusses inventory models and safety stocks. It begins by addressing questions about relevant costs for procurement decisions, limitations of the basic EOQ model, and costs associated with changeovers in manufacturing. It then discusses topics like joint production runs, assumptions in inventory control calculations, computing order quantities when costs differ, and challenges with coordinating multiple functions like inventory control, purchasing, and distribution. The document provides detailed responses and examples to demonstrate concepts in inventory management.
Inventory management 091104161506 Phpapp02
This document discusses inventory management concepts including:
- Defining inventory and providing examples of inventory levels in different industries.
- The costs of holding inventory and pressures to reduce inventory levels.
- The economic order quantity (EOQ) model for determining optimal order sizes to minimize total costs of ordering and holding inventory.
- Key factors that influence the EOQ like demand, ordering costs, holding costs.
- How the EOQ is applied in examples and the insights from sensitivity analysis.
- Extensions of the EOQ model when lead times are present.
- Different inventory control systems for handling demand uncertainty.
Cash conversion cycle
This document discusses working capital and cash conversion cycle management. It begins by defining net working capital and the components of the cash conversion cycle, including inventory turnover, accounts receivable turnover, and accounts payable turnover. It then discusses how to calculate a firm's operating cycle and cash conversion cycle. The rest of the document outlines various strategies and techniques for managing inventory, accounts receivable, and payables to improve a firm's cash conversion cycle, including inventory classification and modeling, accounts receivable credit analysis, and accounts payable payment terms.
Ch10 Managerial accounting aiou mba mcom 8508
This document contains discussion questions about just-in-time (JIT) systems and inventory management. It discusses how JIT aims to minimize raw materials and work-in-process inventory levels by only producing items as needed. JIT also seeks to eliminate waste like defects. The relationship between production velocity and work-in-process inventory levels is inverse - doubling velocity halves the WIP level. Backflush costing is discussed as a method where inventory accounts are adjusted after production rather than continuously.
Ch14. inventory management
This document discusses inventory management models. It describes opposing views on holding inventory, including reasons for and against it. It also covers the nature of inventory, including independent and dependent demand systems. Different inventory models are explained, including fixed order quantity and period systems. Key factors in inventory like order quantities, order points, and costs are defined.
MANAGEMENT ACCOUNTING Model Solution CM231.-MAC-IL-II-Solution-CMA-May-2022-...
MANAGEMENT ACCOUNTING Model Solution CM231.-MAC-IL-II-Solution-CMA-May-2022-...Sazzad Hossain, ITP, MBA, CSCA™
CMA MAY 2022 EXAMINATION
INTERMEDIATE LEVEL II
Subject: CM231. MANAGEMENT ACCOUNTING
Model Solution CM231.-MAC-IL-II-Solution-CMA-May-2022-Examination.pdfInventory 1.1
The document discusses inventory management using analytics for better decision making. It covers key topics like why organizations want to hold inventories like to improve customer service but also don't want to hold too much inventory due to carrying costs. It discusses the tradeoff between inventory and transportation costs. Effective inventory management requires tracking inventory levels, demand forecasting, and estimating costs of holding, ordering and shortages. The nature of inventory can be independent or dependent demand and different systems are used. Key decisions involve how much to order and when to place orders to minimize total costs.
Inventory management
Here are the steps to solve this problem:
D = Annual demand = 250,000 footballs
P = Production rate = 2000 footballs/day
U = Usage rate = 250,000 footballs / 250 days = 1000 footballs/day
S = Setup cost = Rs. 2500
H = Carrying cost = Rs. 100 per football
A) Optimal run size (Q*) = √(2DU/H) = √(2 * 250,000 * 2500/100) = 5000 footballs
B) Minimum total annual cost
Imax = (Q*/P) * (P - U) = (5000/2000) * (2000 - 1000) = 2500
Unit 6 Inventoy. ppt.ppt
The document discusses techniques for effective inventory management. It aims to highlight the need for and nature of inventory, explain different inventory management techniques, and focus on analyzing inventory as an investment decision. Some key points discussed include:
- The objectives of inventory management are to maintain efficient production and uninterrupted sales while minimizing investment costs.
- Effective techniques include maintaining continuous supply, sufficient stock levels, and minimizing costs while keeping inventory at an optimal level.
- The economic order quantity model balances ordering and carrying costs to determine the optimal inventory level. Other techniques covered are reorder points, safety stock, and ABC analysis for classification.
Inventory models
This document discusses inventory management and inventory models. It describes key factors that influence inventory decisions like setup costs, purchase price, holding costs, shortage costs, demand patterns, ordering cycles, lead times, replenishment, and time horizons. Common inventory models are described, including the basic model with constant demand, instant replenishment and no shortages. The economic order quantity (EOQ) formula is derived and an example problem is worked through.
Inventory Management Inventory management
This document provides an overview of inventory management concepts. It discusses the meaning and types of inventory, related costs like ordering, carrying, and shortage costs. It introduces the basic Economic Order Quantity (EOQ) model, which aims to minimize total inventory costs by balancing ordering and carrying costs. The EOQ model formulas and assumptions are explained. It is noted that total costs are not very sensitive around the optimal order quantity. The document also discusses decoupling inventory, quantity discounts, and ABC classification of inventory items.
Ops5
This document discusses key concepts for managing inventory, including:
1. It defines inventory as stock of items used in an organization and explains that an inventory system monitors stock levels and informs replenishment decisions.
2. It outlines different inventory types like raw materials, work-in-progress, and finished goods and describes how materials flow through an organization.
3. It discusses factors that influence how much stock to hold like flexibility, uncertainties, and economic purchasing in large quantities.
Inventory management
- Inventory management is important as it constitutes a significant part of current assets and requires considerable funds. Effective inventory management is needed to avoid unnecessary investment and improve long-term profitability.
- There are various techniques for inventory management including ABC analysis to classify inventory, setting stock levels like maximum, minimum, and average levels, economic order quantity formula to determine optimal order sizes, and safety stock to prevent stockouts.
- Inventory management aims to balance ordering costs, carrying costs, and stockout costs to minimize total costs through techniques like selective inventory control, reorder points, and application of computer systems for inventory tracking.
Inventory management
- Inventory management is important as it constitutes a significant part of current assets and requires considerable funds. Effective inventory management is needed to avoid unnecessary investment and improve long-term profitability.
- There are various techniques for inventory management including ABC analysis to classify inventory, setting stock levels like maximum, minimum, and average levels, economic order quantity formula to determine optimal order sizes, and safety stock to prevent stockouts.
- Inventory management aims to balance ordering costs, carrying costs, and stockout costs to minimize total costs through techniques like selective inventory control, reorder points, and application of computer systems for inventory tracking.
Accounting for Depreciation
Here Depreciation has been discussed. Factors affecting Depreciation, its different methods, with the help of case studies have been discussed
Inventory management
Inventories are stocks of goods that firms hold for reasons like meeting customer demand, smoothing production requirements, and protecting against stockouts. Inventory management aims to balance customer service through adequate stock levels with the costs of ordering and carrying inventory. Models like economic order quantity are used to determine the optimal order size that minimizes total annual inventory costs.
Account receivable and Inventory Management lecture 11,12,13
The document discusses current asset management of accounts receivable and inventory. It provides an overview of accounts receivable management including establishing credit policies, credit terms, and collection policies. It explains why firms accumulate accounts receivable and inventory and defines key terms. The document also discusses finding the optimal level of accounts receivable and inventory using methods like the economic order quantity model. It analyzes the benefits and costs of different inventory and accounts receivable levels.
Improved Inventory Management System for a Jute Mill - A Case Study.
This project work has been carried out for investigating the existing Inventory Management system of the Eastern jute Mills Limited, Khulna, Bangladesh. Eastern Jute Mills Limited manufactures jute products such as hessian, sacks, and jute carpet backing clothes. It was founded in 1967 and is based in Khulna, Bangladesh. It also operates as a subsidiary of Bangladesh Jute Mills Corporation. For investigating the Inventory related data and information, the necessary data has been collected from this Jute Mill. By close look of the present inventory management system and discussing with the executive personals of the Eastern Jute Mills Limited, Khulna, A clear conception of the existing Inventory Management system has been gained. ABC analysis has been carried out for annual demand. Raw Jute purchasing procedure has been examined and storing procedure has been observed by close observation to find out the major drawback of the existing inventory management system. Finally it has been focused to suggest an improved Inventory Management system for the Eastern Jute Mills Limited, Khulna, Bangladesh.
Similar to Chapter 9 & 10 accounts receivable and inventory management (20)
Accounts receivable, inventory, and total quality management
Accounts receivable, inventory, and total quality management
MANAGEMENT ACCOUNTING Model Solution CM231.-MAC-IL-II-Solution-CMA-May-2022-...
MANAGEMENT ACCOUNTING Model Solution CM231.-MAC-IL-II-Solution-CMA-May-2022-...
Account receivable and Inventory Management lecture 11,12,13
Account receivable and Inventory Management lecture 11,12,13
Improved Inventory Management System for a Jute Mill - A Case Study.
Improved Inventory Management System for a Jute Mill - A Case Study.
More from Chang Keng Kai Kent
Chapter 8 risk and return
1) The chapter discusses portfolio risk and return, and how diversification can reduce risk without lowering expected returns. It also covers calculating expected portfolio returns and standard deviation.
2) The Capital Asset Pricing Model (CAPM) measures systematic risk using beta coefficients. Systematic risk cannot be diversified away, whereas unsystematic risk can be through diversification.
3) CAPM predicts that investors will require a higher expected return for investments with higher betas or systematic risk. This relationship is depicted by the security market line.
Chapter 7 an introduction to risk and return
The document discusses the concepts of realized return, expected return, risk, and the efficient market hypothesis. It provides examples of calculating realized returns from investments in stocks and defines expected return as the average of possible future returns weighted by their probabilities. Risk is measured using variance and standard deviation, with higher values indicating greater risk. The efficient market hypothesis suggests that market prices reflect all available information.
Chapter 6 annuity
The document provides an overview of annuities and time value of money concepts. It discusses ordinary annuities, including how to calculate future value, payment amount, interest rate, and number of periods for an ordinary annuity. It also covers present value of annuities, amortized loans including loan payments and schedules, and annuities due. Examples are provided for each topic and how to solve them using a financial calculator or Excel spreadsheet.
Chapter 5 interest
The document discusses simple interest versus compound interest. Simple interest is earned only on the principal amount, while compound interest is earned on both the principal and accumulated interest of prior periods. An example shows that with a $500 principal, 5% annual interest rate, compound interest results in a higher balance ($551.25) after two years compared to simple interest ($550). The document also covers topics like present value, future value, using calculators and formulas to solve for unknown time periods, interest rates, and cash flow amounts.
Chapter 4 financial forecasting and planning
The document discusses developing long-term and short-term financial plans, including using the percent of sales method to forecast financing needs, preparing pro forma financial statements and cash budgets, and analyzing how changes in variables like sales growth, profitability, and dividend policy impact a firm's discretionary financing needs. It also covers uses of the cash budget to predict financing requirements and monitor operations.
Chapter 3 financial analysis
The document discusses analyzing financial statements to evaluate firm performance. It covers common size statements, financial ratios, and analyzing different aspects of a firm's financial health including liquidity, capital structure, asset management efficiency, and profitability. Ratios discussed include the current ratio, debt ratio, total asset turnover ratio, and gross profit margin. The purpose is to use these analytical tools to assess how well a firm is managing its resources and generating returns.
Chapter 2 financial statement, taxes, and cash flow
The document discusses key financial statements that provide information about a company's financial performance and position. It describes the income statement as showing revenues, expenses and profits over a period of time. The balance sheet provides a snapshot of assets, liabilities and shareholders' equity as of a point in time. The cash flow statement reports cash inflows and outflows during a period. Understanding these statements allows analysis of a company's current and future financial condition.
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Chapter 2 financial statement, taxes, and cash flow
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Chapter 9 & 10 accounts receivable and inventory management
- 1. Accounts Receivable and Inventory Management 2005, Pearson Prentice Hall
- 2. 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.”
- 3. Accounts Receivable Management Terms of Sale Annualized opportunity cost of foregoing a discount:
- 4. Accounts Receivable Management Terms of Sale Annualized opportunity cost of foregoing a discount: a 360 x 1-a c - b
- 5. Accounts Receivable Management a 360 x 1-a c - b opportunity cost of foregoing 3/30 net 60: .03 360 1 - .03 x 60 - 30 = 37.11%
- 6. Inventory Management Too much inventory is expensive and wasteful. Not enough inventory can result in lost sales.
- 7. 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.
- 8. Inventory Management Optimal inventory order size: the Economic Order Quantity (EOQ) model: 2SO Q* = C
- 9. Inventory Management Q* = 2SO C 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
- 10. Example: Inventory Management Q* = 2SO C 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
- 11. Example: Inventory Management 2SO Q* = C Q* = 2x250x10,000 1.25 = 2,000 units
- 12. Order Point Problem Average EOQ = + safety stock inventory 2
- 13. Credit Policy Change Refer to pages 309 – 310 (Chapter 10)