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18 Cards in this Set
- Front
- Back
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Aggregate Inventory Management Objectives |
-support business strategy and operations -ensure inventory practices support financial objective -balance customer service, operations efficiency, and inventory investment cost objectives. |
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Item Inventory Management |
Management must establish decision rules about individual inventory items: -importance of inventory items -how to control inventory items -how much to order at one tiem -when to place an order |
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Jusitifcation for Inventory |
(beyond current needs) is only valid if it costs less than to not carry it. |
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Inventory decouples: 1. Demand from____ 2. Customer demand from ____ 3. Finished Goods from ___ 4. output of one operation from ____ 5. materials to being production from ___ |
1. supply 2. finished goods 3. component availability 4. output of preceding operation 5. suppliers of materials |
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study types of inventory |
pg 6-15 |
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load leveling or level production scheduling |
building up anticipation inventory during periods of low demand and then drawing it down during periods of high demand |
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Inventory objectives |
-best customer service -low-cost plant operation -minimum inventory investment |
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5 Categories of costs associated with inventory and management decisions are |
1. item costs. purchased= RM and supplies; manufactured= direct material, direct labor, factory overhead 2. carrying costs= capital, storage, ricks. 3. ordering costs. factory= production control, setup and teardown, lost capacity; PO's= purchasing costs 4. stockout costs- occurs in make-to-stokc when demand exceeds availability. 5. capacity-related costs- when change production levels. like overtime, hiring, layoff, training, and shift premiums. |
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5 types of accounts to classify activities |
BALANCE SHEET 1. assets- items of value (cash, inventory) 2. liabilities- obligations (debt etc) 3. Owner's equity- net worth of the business (difference between assets and liabilities) INCOME STATEMENT 4. Revenue- income from sales (cash) 5. General and administrative expense (all other costs: advertising, insurance etc) |
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Balance sheet |
a statement of the financial value or net worth of a company at a point in time- usually the last day of the calendar or fiscal year. relationship between accounts: assets= liabilities-owners equity |
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Income statement |
Income= revenues- expenses |
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Cash Flow Analysis |
Purpose: determine whether available cash is or will be adequate to cover projected operating expenses. |
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FIFO |
First in first out method of accounting/valuation method. assumes the oldest items (first in) are sold first in inventory. which can change the cost/price of the item if it has changed over tiem. |
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LIFO |
Last in last out method/valuation method. assumes the newest items in inventory are the first ones sold. |
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Average Cost Accounting System |
inventory valuation that uses a weighted average cost of items, based on quantity, to determine cost of goods and inventory valuation. |
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Standard Cost Accounting System |
uses costs determined in advance of production. the costs are based on pre-established standards of labor, material, and direct overhead allocations. |
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Inventory Turns |
A measure of the speed of inventory conversion into sales. Formula= annual cost of goods sold/average inventory in dollars |
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Days of Supply |
Can also be used to evaluate how many days of inventory are being carried to support annual sales. it measures ratio of inventory on hand to average daily inventory. two steps: 1. determine average daily usage = annual sales of units/365 2. days of supply= inventory on hand/average daily usage |
