Motives for holding inventories, Managerial Accounting

Assignment Help:

MOTIVES FOR HOLDING INVENTORIES

If production and delivery of goods were instantaneous, there would be no need for inventories. However in reality, the manufacturing and purchasing processes do not function quickly enough to avoid the need for having inventories. Hence inventories must be maintained so that he or she does not turn to another source of supply. In turn, production operations cannot flow smoothly without having inventories of direct materials, work-in-progress, supplies, etc. In other words inventories must be viewed as cushions:

(1) To absorb planning faults and unforeseen fluctuations in demand and supply. (i.e. preventive motive).
(2) To facilitate smooth production and marketing operations.

Note: The fundamental questions to which answers are required are:

a. How much should the company order (when stocks are re-ordered)?
b. When should the company reorder?
c. How much should the company produce, and when (if internal production is involved).

Accordingly regardless of their complexity, all inventory planning models focus on the twin problem of size and timing.


Related Discussions:- Motives for holding inventories

Cyclic chains-recurrent state, Cyclic Chains: In Markov Chains the cur...

Cyclic Chains: In Markov Chains the current state of the system depends on all previous states. It is a stochastic process.  Sometimes transition probability matrices are diff

Application areas of linear programming, 5 application areas of linear prog...

5 application areas of linear programing in management accounting

Costing and Budgetory Control, Given budgeted figures and actual, then anal...

Given budgeted figures and actual, then analyses each fixed cost into its components

What is production cost, What is Production cost It begins with the sup...

What is Production cost It begins with the supplying of materials, labour and services and ends with the primary packing of the product. Therefore, it includes the cost of d

What is the issue price for bond a and b, Q. What is the issue price for Bo...

Q. What is the issue price for Bond A and B ? On December 31, 20x7, the Jill Corporation issued $20,000,000 of 15 year face value bonds. The bonds pay interest on June 30 and D

Project, Ask question #MRead ALL instructions before getting started! ABC ...

Ask question #MRead ALL instructions before getting started! ABC Corporation is a new company that buys and sells office supplies. Business began on January 1, 2014. Given on th

Explain the shut down cost, Explain the Shut down cost A cost which wi...

Explain the Shut down cost A cost which will be still be required to be incurred even though a plant is closed or shut down for a temporary period. Ffor example the cost of

What is nile''s strategy for success in the marketplace ?, what is nile's s...

what is nile's strategy for success in the marketplace ?

State the factors of cvp, State the factors of CVP The three factors of...

State the factors of CVP The three factors of CVP analysis I e cost volume and profit are interconnected and dependent on one another . for example profit depends upon sales se

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd