Inventory management inventory management is the

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Inventory Management Inventory Management is the process of overseeing the flow of products into and out of a company’s existing inventory[Bar14]. Inventory management involves controlling the transfer of products in order to prevent a company’s inventory from becoming too high or too low, both jeopardize the company’s ability to operate[Bar14]. In addition to inventory, inventory management has to control the cost that comes with keeping an inventory. When it comes to cost allocation either a variable or absorption costing method could be used. With variable costing the fix manufacturing cost are expensed and factored in during the time that they are incurred[Wil13]. Variable costing can also provide a clearer picture of the actual cost associated with products. Variable cost can give and accurate representation of cost of producing each product. Absorption costing the fixed manufacturing cost are expensed when the abc
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Final Paper product is sold[Wil13]. Absorption costing can increase net income by moving fixed manufacturing cost from the income statement to the balance sheet [Wil13]. In this case, Hampshire Umbrella Company should use variable costing. They should use variable costing because they have 20,000 unsold umbrellas and not to skew their operating margins should take in to consideration all cost and expenses at the time of production and not when they are sold. Just-in-Time (JIT) is another inventory system to consider. JIT is an inventory strategy that companies use to increase efficiency and decrease waste by receiving goods only as they are
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Christopher Reinemann
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