T3 | L2 | PURCHASES | Stock Control | Economies and diseconomies of scale | Cash vs credit purchases

Question 1

What are the 7 types of stock?

Answer 1

• Raw Materials
• Capital Goods
• Semi-finished Goods
• Hazardous material
• Finished Products or Manufactured Products
• Maintenance Stock
• Perishable Stock

Question 2

Raw Materials

Answer 2

Refer to the products extracted in the primary sector, e.g. sunflowers from agriculture activities, tuna from fisheries, timber from forestry, and diamonds from mining.

Question 3

Semi-finished Goods

Answer 3

Have already been processed, but are not yet ready for final consumption. An example is the stumps of wood that have not yet been made ready to use as furniture or a cut diamond that has not yet been placed in a ring.

Question 4

Finished Products or Manufactured Products

Answer 4

When goods are ready to be used by the end consumer (individuals or other businesses), it is known as finished products or manufactured products.

Question 5

Perishable Stock

Answer 5

Raw materials, semi-finished goods or finished products, but it requires special storage facilities such as refrigeration facilities e.g. meat, sausage, cheese or fruit to give only a few examples.

Question 6

Capital Goods

Answer 6

Refers to the machinery and equipment that is used during the manufacturing process. The value of capital goods depreciates (decreases) over time due to wear and tear.

Question 7

Hazardous Materials

Answer 7

Must be stored according to prescribed rules and regulations, e.g. there should be a sign that warn people against flammable and toxic substances.

Question 8

Maintenance stock

Answer 8

Consumed within the business, e.g. cleaning agents or lubricants for the machinery.

Question 9

What is Quantity management?

Answer 9

There should always be enough goods and services available in the business to satisfy business and / or the external customer’s needs.

Question 10

What are two important aspects to consider when considering the most economical order quantity:

Answer 10

• Stock order costs (transport, insurance)
• Holding costs (insurance, inventory control costs, etc.)

Question 11

Who do many businesses prefer the amount of inventory held to be kept as low as possible?

Answer 11

As it is can become an expense such as inventory control, wastage of space, damage to products, or products that are obsolete or stolen.

Question 12

What are good reasons why a business must keep more stock on the shelves?

Answer 12

• May be needed for operational reasons, e.g. cash register rolls, light bulbs, cleaning products, etc.
• Buffer Stock
• The business can also receive discounts if stock is purchased in large quantities. The business can then decide to accept the risk of holding stock, as this will give the business a cost advantage.