Planning And Control Of Inventory Flashcards
1
Q
Why is it important to manage inventory effectively?
What 2 conflicting requirements must a company meet in order to determine the optimal level of investment in industry?
A
Ensure money invested does not become unnecessarily large
Ensure stock held is sufficient to meet necessary sales and production
Avoid holding surplus stock which holds up finances
2
Q
Reasons for holding stock
What are the three reasons?
What are the reasons/ meanings for each?
A
Transaction motive, precautionary motive, speculative motive
Allow production to happen in a controlled manner
In case stock deliveries or availabilities fluctuate
In case the price or falls
3
Q
Stock cost equation
A
Holding cost+older cost
