Question

Question No-4                                                                                                                         

1. Why controlling of inventory is important?
2. What is bin card? Draw a bin card.
3. The purchase price of products raw materials is $20 where the annual demand is 50000 units. The holding cost per unit $5 and the cost of ordering an order s 100. Using the trial and error method find the EOQ.

Answer 1

a. Inventory Control refers to the process of managing a company’s warehouse inventory levels. The inventory control process involves managing items from the moment they are ordered; throughout their storage, movement and usage; to their final destination or disposal.

Importance of inventory control:

Inventory control helps to know what you have, where it is in your warehouse, and when stock is going in and out can help lower costs, speed up fulfillment, and prevent fraud.

Inventory control is also important to maintaining the right balance of stock in your warehouses. You don’t want to lose a sale because you didn’t have enough inventory to fill an order. Constant inventory issues can drive customers to other suppliers entirely. When you have control over your inventory, you’re able to provide better customer service. It will also help you get a better, more real-time understanding of what’s selling and what isn’t.

Inventory control helps to reduce excess inventory taking up space in warehouses unnecessarily. Too much inventory can trigger profit losses–whether a product expires, gets damaged, or goes out of season.

b. Bin Card

Bin card is the statement of all the receipts and issue of the stock from the store department. It is also called stock card or bin tag. It is the responsibility of the store keeper to write every in and out of stock  from the store. The physical stock count and the stock quantity reported according to the bin card should be equal; otherwise internal audit department will have the right to investigate the matter with management.

Bin card only contain quantity column for both and receipts and at the close of each transaction, the stock level is calculated to make sure that at every point of time, it can be reconciled with the physical count.

                                                             Bin Card

Material Code:                                                                                             Maximum Level:

Material Description:                                                                                    Minimum Level:

Location:                                                                                                      Reorder Level:

Unit of Measurement:

Date	Doc No.	Received from/Issued to	Receipt	Issue	Balance	Verification with SL Date & verified by

c. EOQ =

2AO с

Here,

A is annual demand of raw material, that is 50000 units

O is Cost of placing one order including the cost of receiving the goods or ordering cost, that is $ 100

C is carrying cost per unit per annum, that is $ 5

EOQ=

100 2 * 50000 * * V 5

        =

V2000000

        =   1414.21 units of Raw material (Approximately 1414 units)