In lieu of the eoq any other optimum order quantity

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Unformatted text preview: ing the purchase request; o Selecting the supplier; receiving, inspecting, and placing the material in storage; and o Paying the vendor. Does the system estimate and routinely update the per unit inventory holding cost, which is an estimate of the cost to hold each additional unit of inventory? Its primary elements are storage space, obsolescence, interest on inventory investment, and inventory shrinkage (due to deterioration, theft, damage, etc.). 4. Does the system re-compute the Economic Order Quantity (EOQ) on a regular basis using the demand forecast, ordering cost, inventory holding cost, and unit cost of the material? In lieu of the EOQ, any other optimum order quantity calculation may be used, provided that it is based on sound principles and it minimizes total cost, including the ordering and inventory holding costs. 5. Does the system compute the reorder point level on a regular basis, considering stock available for issue, backorders, quantities on hold, and quantities due for delivery? 6. Does the system provide information on current inventories and historical usage to be used in capacity planning? 7. Does the system establish overall production/purchase targets necessary to fill customer/consuming agency orders and meet operating schedules? 8. Does the system support predefined inspection plans and quality standards? IT Audit Manual Volume III 61 IT Audit Manual No 9. Item Does the system support the budgeting of resources for inventories? Normally, budgeted resources for inventories are determined by considering: KD Reference (a) projected customer/consuming agency orders based on historical customer/consuming agency activity and (b) management decisions projecting future inventory needs. 10. Does the system identify available funds by inventory commodity and distinguish available funds for items that are slow moving and are carried in the inventory for more than one accounting cycle? 11. Does the system access the core financial system to ensure that funds are available prior to the approval of a request for acquisition of inve...
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