PPT - ABC analysis | Cost Accounting - B Com PDF Download

 Page 1


ABC ANALYSIS
OF INVENTORY
MANAGEMENT
Page 2


ABC ANALYSIS
OF INVENTORY
MANAGEMENT
INVENTORY CONTROL
• Inventory control is the systematic control and regulation of
purchase, storage and usage of materials:
i. To maintain an even flow of production;
ii. To avoid excessive investment in materials.
• Efficient material control reduces loses and wastages of
materials that otherwise pass unnoticed.
• Inventory control is the core of materials management.
• The need and importance of material varies in direct
proportion to the idle time cost of men and machinery and the
urgency of requirements.
Page 3


ABC ANALYSIS
OF INVENTORY
MANAGEMENT
INVENTORY CONTROL
• Inventory control is the systematic control and regulation of
purchase, storage and usage of materials:
i. To maintain an even flow of production;
ii. To avoid excessive investment in materials.
• Efficient material control reduces loses and wastages of
materials that otherwise pass unnoticed.
• Inventory control is the core of materials management.
• The need and importance of material varies in direct
proportion to the idle time cost of men and machinery and the
urgency of requirements.
OBJECTIVES
Scientific control of materials should serve the following
purposes:
(i) To provide continuous flow of required materials, parts and
components for efficient and uninterrupted flow of production.
(ii) To minimise investment in inventories keeping in view
operating requirements.
(iii) To provide for efficient store of materials so that inventories
are protected from loss by fire and theft and handling time and
cost are kept at a minimum.
(iv) To keep surplus and obsolete items to minimum.
Page 4


ABC ANALYSIS
OF INVENTORY
MANAGEMENT
INVENTORY CONTROL
• Inventory control is the systematic control and regulation of
purchase, storage and usage of materials:
i. To maintain an even flow of production;
ii. To avoid excessive investment in materials.
• Efficient material control reduces loses and wastages of
materials that otherwise pass unnoticed.
• Inventory control is the core of materials management.
• The need and importance of material varies in direct
proportion to the idle time cost of men and machinery and the
urgency of requirements.
OBJECTIVES
Scientific control of materials should serve the following
purposes:
(i) To provide continuous flow of required materials, parts and
components for efficient and uninterrupted flow of production.
(ii) To minimise investment in inventories keeping in view
operating requirements.
(iii) To provide for efficient store of materials so that inventories
are protected from loss by fire and theft and handling time and
cost are kept at a minimum.
(iv) To keep surplus and obsolete items to minimum.
METHODS
The following are the common techniques of inventory control:
i. Min-max Plan
ii. The Two-bin System
iii. Order Cycling System
iv. ABC Analysis
v. Fixation of various levels
vi. Use of Perpetual Inventory System and continuous Verifications
vii. Use of Control Ratios
viii. Review of Slow and Non-moving Items.
Page 5


ABC ANALYSIS
OF INVENTORY
MANAGEMENT
INVENTORY CONTROL
• Inventory control is the systematic control and regulation of
purchase, storage and usage of materials:
i. To maintain an even flow of production;
ii. To avoid excessive investment in materials.
• Efficient material control reduces loses and wastages of
materials that otherwise pass unnoticed.
• Inventory control is the core of materials management.
• The need and importance of material varies in direct
proportion to the idle time cost of men and machinery and the
urgency of requirements.
OBJECTIVES
Scientific control of materials should serve the following
purposes:
(i) To provide continuous flow of required materials, parts and
components for efficient and uninterrupted flow of production.
(ii) To minimise investment in inventories keeping in view
operating requirements.
(iii) To provide for efficient store of materials so that inventories
are protected from loss by fire and theft and handling time and
cost are kept at a minimum.
(iv) To keep surplus and obsolete items to minimum.
METHODS
The following are the common techniques of inventory control:
i. Min-max Plan
ii. The Two-bin System
iii. Order Cycling System
iv. ABC Analysis
v. Fixation of various levels
vi. Use of Perpetual Inventory System and continuous Verifications
vii. Use of Control Ratios
viii. Review of Slow and Non-moving Items.
ABC ANALYSIS
• ABC plan is based upon segregation of materials for selection
control.
• It measures the money value, i.e., cost significance of each
material item in relation to total cost and material value.
• The study of each item of stock in terms of its usage, lead time,
technical or other problems and its relative money value in the
total investment in inventories.
• Critical, i.e., high value items deserve very close attention, and
low value items need to be devoted minimum expense and
effort in the task of controlling inventories.