Direct material & Direct labour Flashcards
What is inventory management?
It is planning, coordinating & controlling activities related to the flow of inventory into, through, & out of organization.
What is purchasing cost?
The cost of goods acquired from suppliers including freight.
What are ordering costs?
Costs of preparing & issuing purchase orders, receiving & inspecting the items included in the orders, & matching invoices received, purchase orders, delivery records to make payments.
What are carrying costs?
Costs that arise while holding inventory goods for sale. Includes opportunity costs of the investment tied up in inventory, & costs associated with storage.
What are stock out costs?
Costs that result when a company runs out of a particular item for which there is customer demand & the company must act quickly to meet the demand/ suffer the cost of not meeting it.
What are shrinkage costs?
Cost that result from theft.
What are quality costs?
Costs that result when features & characteristics of a product/ service & not in conformance with customer specifications. Include prevention, appraisal, internal & external failure.
What are optimum stock levels?
The quantity that covers all sales in the period between to stock arrivals.
What happens if a business has too little stock?
Missing out on sales
Missing out on favorable prices
Missing out on discounts
Losing customer loyalty
What happens if a business has too much stock?
Illiquidity
Markdowns
Obsolescence
What is economic order quantity (EOQ)?
A decision that calculates the optimal quantity of inventory to order under a given set of assumptions.
What s a just in time (JIT) system?
Production takes place just in time to complete the order.
What are the benefits of the JIT system?
Less holding & storage cost
Quick reaction to orders
Client satisfaction
Better quality products
No obsolete stock
What are the requirements of a JIT system?
Reliable suppliers
Good relationship with suppliers for fast delivery
Better factory outlay
Zero defects
Flexi workers
What is a time based remuneration system?
Remuneration system that pays employees for the amount of time they spent on work
