Stock control and its level, Cost Accounting

Assignment Help:

Stock control and its Level

Management must formulate decisions regarding to the control of stock levels along with a view to minimizing the cost of the company whereas achieving more efficiency in the material's availability to fulfill planned usage necessities. Consideration must be given to the specified control levels as:

a) Re order quantity and Notice the re-order quantity is not essential the EOQ

b) Minimum stock level

c) Re-order level

d) Maximum stock level

a) Minimum stock level

It is the level below that stock must not fall. It is really a base or buffer stock level. If stock reduces below such point, so there is a danger of stock out.

"Minimum stock level = Reorder level - (Normal consumption x normal reorder period)"

b) Maximum stock level

It is the upper limit above which stock must not be permitted to rise. All material to be maintained in store must contain a maximum level and stock should not be permitted to go beyond such level

"Maximum stock level = Re-order level +re-order Quantity - (Minimum consumption x minimum re-order period)"

c) Re-order level

Is a point which lies among maximum and minimum stock levels at that purchase orders should be placed to ensure such goods ordered are obtained before the minimum stock level is achieved? This is the level of stocks at that replenishment should be made to ignore a stock-out.

"Re-order level = maximum consumption X maximum re-order period"

d) Re-Order quantity

It is the quantity of stock ordered one time the re-order point is achieved. The quantity is like to minimize stock costs getting into consideration the cost of holding stocks and creating a order. It is regarded also like the Economic Order Quantity or EOQ.  It is computed like follows as:

EOQ = √(2DCO/Ch)

Whereas:  D is the annual demand as or knits

               Co is the cost of making one sequence

               Ch is the holding cost per unit per annum


Related Discussions:- Stock control and its level

Demerits of break even point, DEMERITS OF BREAK EVEN POINT 1. It pays n...

DEMERITS OF BREAK EVEN POINT 1. It pays no attention to considerations like effect of government policy changes, changes in the marketing environment etc 2. Fixed cost, enti

Operation and design of cost accounting systems, Operation and Design of Co...

Operation and Design of Cost Accounting Systems A number of features should be taken into account previously to finalizing the design of a cost and management accounting syste

Prepare the journal entries to record non-monetary exchange, Moore Corporat...

Moore Corporation follows a policy of a 10% depreciation charge per year on all machinery and a 5% depreciation charge per year on buildings (the corporation uses the nearest full

Assumptions of break even analysis, ASSUMPTIONS OF BREAK EVEN ANALYSIS ...

ASSUMPTIONS OF BREAK EVEN ANALYSIS 1. Fixed costs for all time remain constant. 2. All costs are divided into fixed and variable costs. 3. Selling price will not alter de

What is the cost of goods manufactured, information for the year ended Dece...

information for the year ended December 31, 2010: Direct labor $16,840 Direct material used 16,300 General and administrative expenses 14,240 Indirect production costs 16,780 Selli

Material cost control, Material Cost Control Therefore Materials form ...

Material Cost Control Therefore Materials form an important cost of output units and that should be controlled.  Material Control is more than merely recording the accounting

Weighted average method - work in progress, Weighted Average Method - Work ...

Weighted Average Method - Work in Progress While this method is employed, all costs of production are considered in assigning costs to inventory. The method puts together open

Find out overhead application rate, Find Out Overhead Application Rate ...

Find Out Overhead Application Rate The given is the budget of Superb Engineering Works for the 2002 year Factory overheads Kshs 62,000

Comment on the cash- flow impacts, Chester & Wayne is a regional food distr...

Chester & Wayne is a regional food distribution company. Mr. Chester, CEO, has asked your assistance in preparing cash-flow information for the last three months of this year. Sele

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd