Accounting for Materials Flashcards
1
Q
P.69 - Total annual cost of holding inventory
A
= Holding cost per unit of inventory (Ch) × Average inventory (Q÷2)
Where Q is order quantity
2
Q
P.69 - Total annual cost of ordering inventory
A
= Cost of placing an order (Co) × Number of orders (D÷Q)
3
Q
P.69 - Total annual cost of inventory
A
= Purchasing costs × Annual demand + Total annual ordering costs + Total annual holding costs
4
Q
P.72 - Reorder level when lead time is constant
A
= Max usage × Max lead time
5
Q
P.73 - Meaning of symbols in EOQ formula
A
- Co = cost of ordering
- D = annual demand
- Ch = cost of holding one unit for one year
Assumes demand and lead times are constant and known, purchase price is constant, and no buffer inventory is held
6
Q
P.77 - Meaning of symbols in EBQ formula
A
- Q = batch size
- D = demand per year
- Ch = cost of holding one unit for one year
- Co = cost of setting up one batch to be produced
- R = annual replenishment rate (eg rate of production)
7
Q
P.85 - AVCO val of inventory
A
- Cumulated weighted avg price = total costs before issue ÷ total number of units before issue
- All issues and inventory valued at average
- Average is recalculated after each receipt
