INVENTORY MANAGEMENT
STOCK/INVENTORY CONTROL
Stock control is all the system put in place to ensure proper management and safeguard of inventory and stock.
ECONOMIC ORDER QUANTITY (EOQ)
Show the lowest amount of stock that should be ordered so that cost of financing and keeping stock are kept down to the minimum.
EOQ=
2CO/S
C=consumption(usage) per annum in units.
O=cost of placing one order
S=Cost of storage and holding one unit per year.
Illustration
Manual consumption=500units
Cost or re-ordering =n4
Storage and holding cost per unit =N1.5 EOQ
(2X 500X4/)1.5
=51.6
=51
COST ASSOCIATED WITH INVENTORY
- MONEY TIED ON STOCK INSTEAD OF INVESTING
- Cost of storage
WAYS TO PREVENT STOCK THEFT DTOCK CONTOL
-CCTV
-ELECTRONIC IDENTIFICATION BEFORE ENTERING THE STOCK ROOM
-STOCK AUDIT
STOCK VALUATION- THIS IS THE COSTING OF INVENTORY
STOCK VALUATION METHOD.
- FIRST IN FIRST OUT(FIFOI)
- LAST IN LAST OUT(LIFO)
- SIMPLE AVERAGE METHOD
- WEIGHTED AVERAGE METHOD
- REPLACEMENT COST METHOD.
ABC Ltd has the following information for his business transaction
Jan1 2019 purchased 10 cartons of rad wine for N2500
Jan 2.2019 purchased 5 cartons of rad wine for N2100
Jan 3.2019 sold 5 cartons of rad wine for N2600
- What is the value of closing stock using
(i) FIRST IN FIRST OUT(FIFOI)
(iLAST IN LAST OUT(LIFO)
- Iii.WEIGHTED AVERAGE METHOD
solution
(i) FIRST IN FIRST OUT(FIFOI)
Closing stock
=(10-5)x 2500=N15,500
=5 *2100 =10,500
VALUE OF CLOSING STOCK- FIFO=15,500+10,500=N26,000
- (i) LAST IN LAST OUT(LIFO)
Closing stock
=10x 2,500=N25,000
WEIGHTED AVERAGE –
Closing stock
=10 x 2500=N25,000
=5 *2100 =10,500
35,500/15
=2366.7
CLOSING STOCK =2366.7X10=N23667
PAYROLL CONTROL PROCEDURES ARE AS FOOLOWS
- ATTENDANCE REGISTER
- EXIT REGISTER
- WORK RESULT/WORK SHEET
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