EPPM2033 COST ACCOUNTING INDIVIDUAL ASSIGNMENT

Price spent to keep and maintain a stock of goods in storage

10 Italian SME Companies Automated warehousing systems Manual warehousing systems Problem on determine inventory holding cost rate for different warehousing systems

Three kinds of influencing variables highlighted from the discussion  The expert opinion on inventory cost computation and cost structures  The warehousing system used  The future mission of the company and operation managers needs

Consist of three items:  initial investment  system operating costs  financial risk

Three kind of warehousing systems  manual warehousing  automated warehousing  automatic warehousing

Approach A  Cost structure is divide into 3 part ◦ evident costs ◦ semi-evident cost ◦ hidden costs  suitable when fixed and variable storage costs is approximately the same

Approach B  Develop a measuring approach based on cost elements capacity  Introduce standard PC-based supervisory control which provides higher accuracy ◦ Warehouse Management System Software (WHMS)

Manual warehousing  Inventory holding cost parameters range 21.9%-32.9% of the inventory value on the storage.  They found that semi-evident and hidden costs are equal or even higher than evident costs which is relevant variable in the inventory cost parameters  Opportunity cost of capital represent the leading factor in determining the percentage of carrying cost

Automated warehousing  Invested in double-depth bay racks warehousing systems with automatic rack service cranes  They found that semi-evident and hidden costs are equal or even higher than evident costs which is relevant variable in the inventory cost parameters  Annual storage cost parameter ranges between 34.8€ and 70.8€ per pallet position.

Automated warehousing  Annual investment costs represent about the 85% of total annual storage costs  use of standard ranges of variation for each cost seems justified

 They have ability to measure inventory holding cost parameters  Find a consistent set of inventory holding cost parameters

 Improve cost accounting system  Strongly recommended this approach implemented into Malaysian’s companies systems.  Help managers to allocated inventory holding cost more accurate

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