2 Cost of Control 3 Cost of holding 4 Cost of damages 5 Cost of shrinkage 6

2 cost of control 3 cost of holding 4 cost of damages

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2. Cost of Control. 3. Cost of holding. 4. Cost of damages. 5. Cost of shrinkage. 6. Cost of obsolescence. Excess inventories can lead to following costs: 1. Cost of Capital. 2. Cost of holding (storage, insurance, damage etc…). 3. Cost of obsolescence (products getting unsalable either due to date expiry or newer versions coming in the market). 7.4 SELF ASSESSMENT QUESTIONS 1. What is meant by stock out? What can be fall out of such a situation? 2. What is meant by the term 'working capital' ? 3. Give 2 examples of current assets and 2 examples of current liabilities. 4. What are the several costs associated with extension of credit? 120
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WORKING CAPITAL REFERENCE MATERIAL Click on the links below to view additional reference material for this chapter Summary PPT MCQ Video Lecture 121
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BUDGETS Chapter 8 BUDGETS Learning Objectives After going through this chapter you should be able to understand: Understand and appreciate the meaning and scope budgets. Appreciate the role of budgets in planning and controlling the marketing activities. Learn how to prepare sales and marketing budgets. Structure: 8.1 Budgets 8.2 Marketing Expenses 8.3 Summary 8.4 Self Assessment Questions 8.1 BUDGETS Budgets are simultaneously tools for both planning and controlling. While primarily budgets are a planned statement of revenues and expenditures based on (i) A pre planned set of activities, (ii) Having a pre-defined time dimension, viz., for a certain fixed period, along with (iii) A place dimension, viz., covering a certain geographical area, and also (iv) A situational dimension, viz., under certain given conditions, One should also appreciate that the same budget can be used for controls. 122
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BUDGETS Plotting actual activity progress against planned activities, forms the essence of budgetary controls. When we mention 'under given conditions' we emphasize that the budget performance assumes certain environmental and support activity pre conditions. If these change then the budget needs modifications. Thus the concept of contingency plans or flexible budget arises. If for instance a Government order permits free import of a product which can substitute the organization’s product (for which budget had been made), the changed condition may warrant a downward revision in the sales estimate and a consequent change in the entire budget, or, for instance, a sudden problem in a competitor’s unit creates a situation where the competitor’s products are not available in the market for some time, the situation may warrant an upward revision in the budget. In the case of marketing and sales the budget will start with estimating the sales forecast. A detailed sales forecasting exercise covering all the product lines/items marketed by the organization, starting from the most basic unit level is made, each SKU (stock keeping unit) wise. This detailed forecast is then aggregated upwards to arrive at the overall organization level sales plan.
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