Lecture 5_complete_6perpage - ACCT3104 Managerial Costing...

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ACCT3104 Managerial Costing and Control Lecture 5 Inventory Management, Just-in-Time and Backflush Costing Reading: Chapter 20 2 Mid-semester Exam Details ± When? Saturday 5 th September 9AM ± Where? Room Allocations: St Lucia: Agung-Davis 01-E109 Davy-Howe 01-E215 Hsiao-Li 07-222 Liew-Nicol 07-234 Nieuw-Soo 42-115 Soto-Woo 42-216 Wood-Zou 50-T103 Ipswich: Bldg 12-309a ± Topics Examined? Topics 2-5 inclusive ± Format? Format? 35 MCQ’s approx 9 Q’s per topic, approx 30% theory ± Time allowed? 90 minutes +10 (can work during perusal) ± Bring? Student ID, Calculator (non-alphanumeric), Pencils, Eraser… 3 Lecture – Overview ± Inventory Management- a pivotal part of profit planning for manufacturers and retailers ² Costs associated with Goods for Sale ² Inventory Costs ² EOQ ± Optimal order quantity ± Reorder point ± Safety Stock ± Cost of Prediction Error ² JIT Purchasing ² MRP ² Inventory management and JIT Production ² JIT and ERP ² Backflush costing and Lean Accounting 4 Costs Associated with Goods for Sale ± Managing inventories to increase net income requires effectively managing costs that fall into these five categories: 1. Purchasing Costs 2. Ordering Costs 3. Carrying Costs 4. Stockout Costs 5. Quality Costs 5 Inventory Costs ± 1 Purchasing costs ² costs of goods acquired including freight inwards ² affected by quantity discounts (order sizes) ± 2 Ordering costs ² costs of preparing, issuing and paying purchase orders ² Costs of receiving and inspecting the items included in the orders ± 3 Carrying costs ² costs of carrying inventory (incremental) ² cost of storage (eg., rental, insurance, spoilage, obsolescence) ² opportunity cost of investment 6 ± 4 Stockout cost ² costs of not having sufficient inventory ² additional ordering (expediting) costs and associated freight costs ² opportunity costs - lost contribution margin on sale not made and future sales (due to customer ill-will) ± 5 Quality costs ² costs of conformance ² prevention, appraisal, internal and external failure costs (this topic will be considered in Week 10) ± 6 Inventory Shrinkage – unexplained disappearances of Inventory
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7 Economic-Order-Quantity (EOQ) Decision Model ± Optimal quantity of inventory to order ² simplest version – balances ordering and carrying costs only ² minimises relevant ordering costs and carrying costs ² Relevant total costs = Relevant ordering costs + Relevant carrying costs ± Reorder point ² when should an order be placed ± Safety Stock ² inventory held at all time regardless ± Cost of Prediction Error 8 EOQ - Assumptions 1 Fixed quantity ordered at each reorder point 2 Demand, ordering costs, and carrying costs are known with certainty (and there are only ordering and carrying costs) 3 Purchase-order lead time is known with certainty 4 Purchasing costs per unit unaffected by quantity ordered (no quantity discounts) 5 No stockouts occur; stockout costs can be prohibitively high 6 Costs of quality (& shrinkage) considered only to extent that they affect ordering costs or carrying costs 9
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This note was uploaded on 08/30/2009 for the course BUSINESS ACCT3104 taught by Professor Sandra during the Spring '09 term at École Normale Supérieure.

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Lecture 5_complete_6perpage - ACCT3104 Managerial Costing...

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