vandu ppt

8/3/2019 vandu ppt

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A A

presentationpresentationonon

inventory : meaning andinventory : meaning and

typestypes

Presented byPresented by Vandana Malhotra Vandana Malhotra

Roll no : 48Roll no : 48

Class: VII semesterClass: VII semester

8/3/2019 vandu ppt


Meaning of inventoryMeaning of inventory A detailed, itemized list, A detailed, itemized list,report, or record of thingsreport, or record of thingsin one's possession,in one's possession,especially a periodicespecially a periodicsurvey of all goods andsurvey of all goods and

materials in stock.materials in stock.

8/3/2019 vandu ppt


Inventory examplesInventory examples

While accountants often discuss inventoryWhile accountants often discuss inventoryin terms of goods for sale, organizationsin terms of goods for sale, organizations --manufacturers, servicemanufacturers, service--providers and not providers and not--forfor--profitsprofits -- also have inventories (fixtures,also have inventories (fixtures,furniture, supplies, ...) that they do not furniture, supplies, ...) that they do not

intend to sell. Manufacturers', distributors',intend to sell. Manufacturers', distributors',and wholesalers' inventory tends to clusterand wholesalers' inventory tends to clusterin warehouses.in warehouses.

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Cont..Cont..

Retailers' inventory mayRetailers' inventory mayexist in a warehouse or inexist in a warehouse or in

a shop or store accessiblea shop or store accessibleto customers. Inventoriesto customers. Inventoriesnot intended for sale tonot intended for sale tocustomers or to clientscustomers or to clients

may be held in anymay be held in anypremises an organizationpremises an organizationuses.uses.

8/3/2019 vandu ppt


Cont..Cont..

Stock ties up cash and,Stock ties up cash and,if uncontrolled, it will beif uncontrolled, it will beimpossible to know theimpossible to know the

actual level of stocksactual level of stocksand thereforeand thereforeimpossible to controlimpossible to controlthem.them.

8/3/2019 vandu ppt


Inventory management Inventory management

Inventory managementInventory managementis concerned withis concerned withkeeping enough productkeeping enough product

on hand to avoid runningon hand to avoid runningout while at the sameout while at the sametime maintaining a smalltime maintaining a smallenough inventoryenough inventory

balance to allow for abalance to allow for areasonable return onreasonable return oninvestment.investment.

8/3/2019 vandu ppt


Type of inventory

Raw material Spare parts Work in progress Finished goods

8/3/2019 vandu ppt


1st Type of Inventory1st Type of Inventory-- RawRaw

materials Inventorymaterials Inventory Raw Materials are the most Raw Materials are the most

basic materials that businessesbasic materials that businesses

need in making their finalneed in making their finalproducts. Raw materialproducts. Raw materialinventory consists of basicinventory consists of basicmaterials that have not yet materials that have not yet

been committed to productionbeen committed to productionin a manufacturing firm.in a manufacturing firm.

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Cont..Cont..

Raw materials that areRaw materials that arepurchased from firms to bepurchased from firms to be

used in the firms productionused in the firms productionoperations range from iron oreoperations range from iron oreawaiting processing into steelawaiting processing into steelto electronic components to beto electronic components to be

incorporated into computers.incorporated into computers.

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Cont..Cont..

The purpose of maintainingThe purpose of maintainingraw material inventory is toraw material inventory is to

separate the productionseparate the productionfunction from the purchasingfunction from the purchasingfunction so that any problemfunction so that any problemin shipment of raw materialsin shipment of raw materials

do not cause productiondo not cause productiondelays.delays.

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2nd Type of Inventory2nd Type of Inventory SpareSpareParts:Parts:

Spare Parts: This categorySpare Parts: This categoryincludes those products, whichincludes those products, whichare complimentary to the mainare complimentary to the mainproducts produced for theproducts produced for the

purpose of sale.purpose of sale.

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Cont..Cont..

Examples of spare part itemsExamples of spare part itemsare bolts, nuts, clamps, screwsare bolts, nuts, clamps, screwsetc. These spare parts areetc. These spare parts areusually bought from outside orusually bought from outside orsome times they aresome times they aremanufactured in the companymanufactured in the company

also.also.

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3rd Type of Inventory3rd Type of Inventory WorkWork--inin--

Process:Process: WorkWork--inin--ProcessProcess

Inventory: This categoryInventory: This categoryincludes those materialsincludes those materialsthat have had work donethat have had work doneon them but have noton them but have notbeen completed. Thebeen completed. Themore complex andmore complex and

lengthy the productionlengthy the productionprocess, the larger will beprocess, the larger will bethe investment in workthe investment in work--inin--process inventory.process inventory.

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Cont..Cont..

Its purpose is to uncouple the variousIts purpose is to uncouple the variousoperations in the production process sooperations in the production process sothat machine failures and work stoppagesthat machine failures and work stoppagesin one operation will not affect the otherin one operation will not affect the otheroperations.operations.

8/3/2019 vandu ppt


4th Type of Inventory4th Type of Inventory FinishedFinished

Good InventoryGood Inventory ::

Finished Goods Inventory:Finished Goods Inventory:

These are completed productsThese are completed productsawaiting sale. The purpose of awaiting sale. The purpose of finished goods inventory is tofinished goods inventory is touncouple the productions anduncouple the productions andsales functions so that it nosales functions so that it no

longer is necessary to producelonger is necessary to producethe goods before a sale canthe goods before a sale canoccur.occur.

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Cont..Cont..

The basic flow of production reveals theThe basic flow of production reveals thenecessary type of inventory that necessary type of inventory that businesses must keep. Raw materials arebusinesses must keep. Raw materials areturned into work in process which is thenturned into work in process which is thentransformed into finished goods whilst alltransformed into finished goods whilst allthroughout being supported by sparethroughout being supported by spare

parts.parts.

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Cont..Cont..

There are other types of inventory that There are other types of inventory that some businesses can have such assome businesses can have such asrejected, damaged or obsolete goods, but rejected, damaged or obsolete goods, but the 4 mentioned above cover most the 4 mentioned above cover most industriesindustries

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1 day

12 unit

Delay: 5 days

60 units

Delay : 2 days

24 units

Delays: 1 day

12 units

Delay

Credit

Period: 30 days

360 units

Flow chart of distribution processFlow chart of distribution process

8/3/2019 vandu ppt


8/3/2019 vandu ppt


vandu ppt

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