Setting of Various Stock Levels

Determination of various levels of  inventory is one of the prime responsibility of Materials Department. The purpose behind setting of different stock levels is to ensure smooth operation of the enterprise and allocation of appropriate amount of monetary resources to different items in the inventory. A number of factors affect the determination of  stock levels for different items. Some of these are: Rate of consumption Lead time Storage /warehousing /carrying costs Insurance cost Seasonal considerations Price fluctuations Economic Order Quantity (EOQ) Quality of raw material Availability of space Availability of funds…

Inventory Control

Inventory means stocks i.e. stocks of raw material, stores, consumables, work in progress, finished products etc. In maximum business concerns, a large amount of funds are invested in buying stocks of materials. This not only results in unnecessary blocking of funds in stocks but also an increse in the cost of production due to increased expenditure on insurance and storage of additional  stocks. This increased cost can add to the price of our product and make our product uncompetitive in the market, which can result in lesser sales and hence lower…

Pre-requisites for the success of standard costing

For establishing a system of standard costing, a number of requirements are to be fulfilled, which are; 1. Establishment of Cost Centres 2. Classification of Accounts 3. Types of Standards 4. Setting Standard Costs Let’s have a discussion on each of them to have a good understanding of the process. 1. Establishment of Cost Centres: A cost centre is a person, location or an equipment or ( a group of these ) In respect of which costs are to be ascertained. For example there may be 10 machines in a…