Core concepts
- 01EOQ minimizes total inventory cost (ordering + carrying).
- 02ABC analysis: A = high value low qty, C = low value high qty.
- 03VED analysis (Vital, Essential, Desirable) for stores.
- 04Stock levels: Re-order, Min, Max, Average; safety stock for uncertainty.
- 05Pricing of issues: FIFO, Weighted Average, Standard Cost (LIFO not preferred per AS-2).
Flowchart
Inventory Management | EOQ ────► Optimal Order Size | ABC, VED, FSN, HML — analyses | Stock Levels: Re-order, Min, Max, Danger
Exam-critical pointers
- ⭐EOQ assumes constant demand, instant replenishment, no stock-outs.
- ⭐Carrying cost includes storage + interest on funds blocked + insurance + obsolescence.
- ⭐Material price variance = (SP − AP) × AQ; usage variance = (SQ − AQ) × SP.
- ⭐Bin Card maintained at stores; Stores Ledger by costing department.
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