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

Illustrate traditional budgeting vs zero base budgeting, Traditional budget...

Traditional budgeting vs. zero base budgeting 1) Traditional budgeting is accounting oriented. Main stress happens to be on previous level of expenditure. Zero base budgeting m

Private sector companies have multiple stakeholders who are, Private sector...

Private sector companies have multiple stakeholders who are likely to have divergent interests.( five stakeholder groups and discuss their financial and other objectives).

Accounting for pension plans, how do i calculate the actuarial gains or los...

how do i calculate the actuarial gains or losses on the present value of plan obligations?

Explain indirect expanses, Explain Indirect expanses: These are expanse...

Explain Indirect expanses: These are expanses which can't be directly conveniently and wholly allocated to a specific cost centres or cost units examples of such expanses are h

Bugeting, PART 1 Carlton Ltd operates at capacity and makes glass-topped d...

PART 1 Carlton Ltd operates at capacity and makes glass-topped dining tables and wooden chairs which are then typically sold as sets of four chairs with one table. However, some c

Advantages of value added statements, Advantages of Value Added Statements ...

Advantages of Value Added Statements 1) Managers might be in a better position to control their organizations own inputs than the cost and usage efficiency of purchased materia

Activity-based costing system, The Pinewood Furniture Company Pty Ltd plans...

The Pinewood Furniture Company Pty Ltd plans to design two lines of chairs in the coming year-lounge and patio. The company is considering introducing an activity-based costing sys

What is traditional costing, What is traditional costing In traditiona...

What is traditional costing In traditional costing overheads are first related to cost centers (production and service centres) and then to cost object, i.e. production. ABC o

Include specific technologies to support your point, Winner says, "It is cl...

Winner says, "It is clear that in decades to come a great many things like telephone answer machines and automatic bank tellers will become, in effect, members of our society." Mor

Assignment help, I need help making sure I did my accounting assignment cor...

I need help making sure I did my accounting assignment correctly

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