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Selective Inventory Management
The inventory of an industrial firm generally comprises thousands of items with diverse prices, usage and lead time, as well as procurement and/or technical problems. It is neither desirable nor possible to exercise the same degree of control over all those items. The organization must pay more attention and care to those items whose usage value is very high and less attention to those whose usage and utilization value is low. The organization has, therefore, to be selective in its approach to control its investment in various types of stocks and inventories. Such a system is known as `selective inventory control' system.
Cascade Water Company (CWC) currently has 30 000 shares of common stock outstanding, trading at a price of R42 per share.
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Excess machine hours 20,000. Received offers from two companies to buy 210,000 units of F at 0.60 and 300,000 units of D at 0.70. Estimated costs for the two products are;
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