Chapter 14 working capital and current assets

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Unformatted text preview: ays. He or she also would favor large production runs for the sake of lower unit production costs, which would result in high finished goods inventories. CHAPTER 14 Working Capital and Current Assets Management 607 The purchasing manager is concerned solely with the raw materials inventories. He or she must have on hand, in the correct quantities at the desired times and at a favorable price, whatever raw materials are required by production. Without proper control, in order to get quantity discounts or in anticipation of rising prices or a shortage of certain materials, the purchasing manager may purchase larger quantities of resources than are actually needed at the time. Common Techniques for Managing Inventory Numerous techniques are available for effectively managing the firm’s inventory. Here we briefly consider four commonly used techniques. The ABC System ABC inventory system Inventory management technique that divides inventory into three groups—A, B, and C, in descending order of importance and level of monitoring, on the basis of the dollar investment in each. two-bin method U...
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