Inventory Control Flashcards
A method or approach for monitoring an organization’s inventory levels and making sure the proper quantity or amount of goods is on hand when needed.
Inventory Control
It helps an organizations to minimize
costs, reduce waste, improve cash flow and keep a functional supply chain.
Effective inventory control
(4) Classification of inventories
Raw Materials
Work-in-Process (WIP)
Finished goods
Maintenance, repair, and overhaul
(MRO)
Inventory management techniques
JIT
EOQ
ABC Analysis
A principle of producing goods or delivering services precisely when they are needed, neither too early nor too late.
Just-in-time
A method used to determine the optimal order quantity that minimize total inventory costs. It is equal to √2SD/H
Economic Order Quantity
Used in inventory management & resource allocation to categorize items based on their importance, price & sales volume.
ABC Analysis
class – expensive, high-class items with tight controls and small inventories
class – average-priced, mid-priority items with medium sales volume and stocks
class – low-value, low-cost items with high sales and huge inventories
ABC
Also known as manual control system, pertains to a recurring count of goods at specific intervals
Period Inventory Control System
Provides an accurate count of inventory levels in real-time. It utilizes technology such as barcodes and radio frequency identification (RFID).
Perpetual Inventory Control System
Inventory Costing Methods
a. First-in-First-out (FIFO)
b. Last-in-First-out (LIFO)
c. Weighted Average
It is a principle used to determine the cost of goods sold (COGS). An assumption that the earliest inventory acquired is the first to be sold, newer invetory stocks left behind.
FIFO
It is also a principle used to determine the cost of goods sold (COGS) and the value of ending inventory. An assumption that the most recequently acquired or produced inventory is the first to be sold or used.
LIFO
It is used to calculate the average cost of inventory by considering both the cost and the quantity of goods available for sale during a specific accounting period. An assumption that all units of inventory are interchangeable and valued equally, regardless of when they were acquired or individual costs
Weighted Average
Inventory Performance Metrics
Key performance indicators
• Inventory turnover ratio
• Days sales of inventory
• Fill rate
