Chapter 67, Stock Control

Question 1

Three properties of stock

Answer 1

raw materials
work-in-progress
finished goods

Question 2

Benefits of holding stock

Answer 2

• Satisfying demand
• coping with fluctuations in demand
• buffer stock to meet late deliveries
• cot savings due to economies of scale purchases

Question 3

Costs of holding Stock

Answer 3

• Storage Costs
• Opportunity Costs
• Depreciation costs
• Security costs
• Administrative costs
• Insurance costs
• Out of stock costs

Question 4

Stock Control charts

Answer 4

Key aspects
Maximum stock level:
- Product (stock turnover levels, size)
- Level of sales
- Cost of storage
- Degree of competition 
- Timing of marketing campaigns 
- Time of year

Minimum stock level:

• level of sales
• time needed to deliver new stock
• History of unforeseen circumstances

Recorder Level

• Fixed time
• Economic order level

Buffer stock
Lead time

Question 5

Average stock level

Answer 5

Maximum Stock Level + minimum stock level / 2

Question 6

Control of stock Levels

Answer 6

LIFO: Last in first out
FIFO: First in first out