Determine how much to stock, Cost Accounting

Determine how much to stock

1. Employ The Economic Order Quantity Model

This is an easiest model which helps the manager to find out the optimum quantity of stock to order so like to maintain total costs at a minimum.  The major costs of inventory are as:

  • Shortage costs
  • Ordering or set up costs
  • Holding or carrying costs

To find out the economic order quantity the given formula may be employed as:

EOQ = √(2DCO/Ch)

Whereas: D is the annual demand or knits

        And Co is the cost of creating one order

        And Ch is the holding cost per unit per annum   

2. Employ Pareto Analysis

Into three classes items are classified as given as:

Class A: These are high cost, high usage and fast moving items. They are little accounting for only twenty percent (20%) of the net number of items yet account for eighty percent (80%) of the net inventory budget.

Class B: These are type of medium moving goods. They account for fifteen percent (15%) of the net number of the budget

Class C: These are type of slow moving low value items. They are very various accounting for sixty percent (65%) of the net number of items and only five percent (5%) of the net inventory budget.

Posted Date: 2/5/2013 4:43:47 AM | Location : United States







Related Discussions:- Determine how much to stock, Assignment Help, Ask Question on Determine how much to stock, Get Answer, Expert's Help, Determine how much to stock Discussions

Write discussion on Determine how much to stock
Your posts are moderated
Related Questions

The following details were extracted from the standard cost card of a component:       Raw Materials              2.82 Kgs @ Rs.4.80 Kg.     Direct Labour            Type I   6

Example of Flexible and Fixed Budget A company has budgeted to produce and sell 100,000 units of cakes throughout the next period. The selling price per cake is Sh. 20 and var

STANDARD COSTING STANDARD COSTING is a method, which uses standards for costs and revenues for the idea of control by variance analysis. It can be used either through operation

A corporation acquired a truck on July 1, 2012, at a cost of $162,000. The truck has a six-year useful life and an estimated salvage value of $18,000. The straight-line method of d

Requirement for additional Funds A business would require additional capital for two purposes: 1. Financing additional fixed assets, and


A company manufactures a single product. Estimated cost data regarding this product and other information for the product and the company are as follows: Sales price per unit Rs.2

A company is considering the following alternatives: Alternative 1 Alternative 2 Revenues $240,000 240,000 Variable costs 120,000 140,000 Fixed costs 70,000 70,000 Which of the fol

conard transfered 10000 from her account to the business