Accounting for materials

1 Inventory Control Reasons 1 Holding cost of inventory may be expensive. 2 Production will be disrupted if we run out of raw materials. 3 Unused inventory with a short shelf life may incur unnecessary expenses. .

Ordering and receiving materials Proper records to make sure : 1 That enough inventory is hold 2 That there is no duplication of ordering 3 That quality is maintained 4 There is adequate record keeping for accounts purposes

How to deal with it ? Purchase requisition Purchase order Quotations Delivery note Goods received note Materials requisition note Materials transfers and returns Computerised inventory control systems

The inventory count (stocktake) The inventory count (stocktake) involves counting the physical inventory on hand at a certain date ,and then checking this against the balance shown in the inventory records. Perpetual inventory

１ ＦＯＲＭＵＬＡ ＴＯ ＬＥＡＲＮ Question :maximum usage 250 per days ＦＯＲＭＵＬＡ　ＴＯ　ＬＥＡＲＮ １ Reorder level =maximum usage × maximum lead time Question :maximum usage 250 per days Lead time for replenishment 20-40 days What is the reorder level? A 5000 B7500 C10000 D2500

2 Minimum level = reorder level －(average usage ×average lead time) Question: Minimum level 75000units average usage 250 per days lead time 8~12 days What is the reorder level? A 5000 B7500 C10000 D2500

3 Question：Maximum level 10000units What is the reorder level? Maximum level =reorder level ＋reorder quantity －（minimum usage ×minimum lead time） Question：Maximum level 10000units Reorder quantity 5000 units Minimum usage 250 per days Lead time 10~20 days What is the reorder level? A 5000 B7500 C10000 D2500

4 Question: Safety inventory 500 Average inventory =safety inventory ＋ ½ reorder quantity Question: Safety inventory 500 Reorder quantity 3000units The average inventory is approximately A2000 B2300 C2500 D 3500

5 EOQ=√2C0D/CH CH =cost of holding one units of inventory for one time period C0 =cost of ordering a consignment from a supplier D =demand during the time period

Question：C0=$25 D=10000 CH=$2 EOQ=?

FIFO(first in , first out ) FIFO(first in , first out ) Definition : in my opinion ,the earlier inventory, the earlier being used. Example :an company buy a batch of goods on 2014,5,6. 200 units prise $5, then 2014,5,7. 200 units price $6. 2014,5,8 company uses 300 units , then question is coming : how much this fees is . The answer is $1600. the first 200 units price is $5 so the fees is $1000 then 100 units price is $6 so the fees is $600. So the all fees is $1600. 2019/1/16

LIFO(last in, first out ) Definition :in my opinion, the later inventory, the later being used. Also use previouse example, the answer is same? No, no. the answer is different. The answer is $ 1700. The first 200 units price is $6 so the fees is $1200, then 100 units price is $5 so the fees is $500,so all the fees is $1700. 2019/1/16

AVCO(cumulative weighted average pricing) Definition:in my opinion the units multiply by the price then divide the all of units. Aslo use previous example: yes the answer aslo is different. The correct answer is $1650. The units is 300.The uint price is $5.5. However, how the unit price form? $5 add $6 divide 2 equal to $5.5. No, no. The correct answer is: 200 units muliply by $5 add 300 units multiply by $6 equal to $2200, then 200 units add 200 units equal to 400 units ,then $2200 divide 400 units equal to $5.5.Bycoincidence, the answer is the same .But the two properties is not same.Only use the second method is right. 2019/1/16