Control Basics
This control focuses on safeguarding assets against theft and is characterized by "segregation of duties"
Physical Control
Solve for X in the basic ordering cost formula: Total Ordering Cost = Cost per order * X.
Number of Orders
In this perpetual system method, a new average is computed after each purchase.
Moving Average Method
This method assumes the earliest cost recorded is the first cost taken out.
First-In, First-Out (FIFO)
This "innovative" strategy aims to have the "right materials in the right place at the right time".
Just-In-Time (JIT)
To ensure records are correct, this type of "audit" should be made regularly by an auditor.
Surprise Audit
These are the costs of maintaining or storing inventories, such as insurance and taxes.
Carrying Costs
This system only calculates inventory balances at specific intervals, like at the end of the month.
Periodic Inventory System
This method requires each item sold or remaining to be identified by its specific price.
Specific Identification Method
This law (the 80-20 rule) is the basis for the ABC inventory classification model
Pareto's Law
This objective aims to maintain a "proper balance" of stock to avoid over-investment
Controlling the Investment (Cash Outlay)
What does "AD" stand for in this formula: EOQ = Square Root of [(2 * AD * OC) / CCPU]?.
Annual Demand
Solve for the price: P28,875.00 (Total Cost) / 2,550 (Total Units)
P11.32
This inventory "valuation" is considered most realistic under the FIFO method.
Ending Inventory
This is the "antithesis" of JIT, where buffers are held in case something goes wrong.
Just-In-Case management
This practical technique uses two stocking areas to signal when to reorder.
The Two-Bin System
This is the inventory level where a purchase order should be placed.
Reorder Point (ROP)
In this system, inflows and outflows are recorded at every transaction.
Perpetual Inventory System
Management can use this method to choose which specific units to sell to shift profit.
Specific Identification Method
JIT is often described as "stockless" production because inventory is seen as this.
Wasted investment
This classification groups high-value items into Class A and low-value into Class C.
ABC Classification
Calculate the ROP if: Daily Usage = 250 and Lead Time = 10 days.
2,500 units
What is the formula for the "Simple Weighted Average" per unit?.
Total amount of purchases / Total number of units acquired
Under FIFO, this is the first "layer" of units used when an issuance happens.
Beginning Inventory (or earliest recorded cost)
These three inventory types act as buffers in traditional systems: Raw, WIP, and __.
Finished Goods