Questions & Answers To Stock Control

September 22nd, 2007 Comments off
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Three Questions On Store Control

Question No 1

You just joined an engineering company. The company set up a department to deal with stock control.

Your boss asked you to narrate the functions of the stock controller and the importance that this department must operate efficiently.

Question No 2

(a)You are the Accountant to a medium size manufacturing company what considerations would you have in mind when preparing for the annual stocktaking?

If you should decide to install a system of perpetual inventory and continuous stocktaking, what advantages would you expect the company to receive?

Question No 3

Give three problems met in determining the economic order quantity.

Answers To Questions On Stock Control

Answer to Question No 1:

(a) Function of the stock controller:

· Management of storehouses

· Accepting or rejecting materials after inspection and checking

· Responsibility for the recording of receipts ad issues of materials on the bin cards

· Preparation of purchase requisitions in respect of low stocks

· Issuing materials on the authority of material requisitions

· Responsibility for the safe custody and protection of stock so as to avoid loss and deterioration.

(b) Reasons why the stock control function must be efficiently performed:

· Production departments need a balanced flow of materials to suit their requirements

· Excessive handling must be avoided as this increases the cost but not the value of the goods

· Efficient handling improves productivity

· Faulty storage leads to deterioration of materials.

Answer to Question No 2:

(a) Please go to my other blog to see the standard operating policy on stocktaking

(b) Points to make:

· A stricter control of stock helps to reduce the loss due to pilferage and wastage

· Deterioration and other storage faults are detected earlier and losses may be avoided

· Records will provide information for determination of maximum and minimum stock and will enable optimum order size to be established

· Interim accounts can be prepared without special stocktaking

· With continuous stocktaking the perpetual records can be used and the dislocation of annual stocktaking can be avoided.

Answer to Question No 3:

(a) The rate of consumption or usage. This can be found by referring to past records or by an estimate based on production and sales expected in the future

(b) Cost of re-ordering. This is not an easy calculation , due to the variety of work carried out in the purchasing department for different products and for different purposes, but a figure has to be placed on the cost of dealing with orders and the expenses of receiving and inspecting the goods.

(c) The storage and holding cost. This includes the interest on capital invested in stock, together with other charges such as those of deterioration and obsolescence, insurance and certain handling costs.

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