Question

a) The manager of Ghana Boxes company has a lot of challenges managing its stock item in inventory, the company has decided to employ a stores manager, you have been shortlisted as an applicant suitable for the job, you have been asked by a panel member in the interview, to explain the likely challenges affecting the stores of the box production company and suggest ways through which as a potential store manager, mechanisms you would adopt to ensure inventory are managed within the standard practice.

b) In your view to protect the investment of the company, what measures would you suggest that the company adopts to protect the capital invested in the stock items and why?

c) Finally, in the bid to keep accurate records explain the various stock-taking methods available to the stock manager and how these would differ between your choice of the company above and a grocery store?

Answer 1

A) Challenges faced to manage inventory are:

1) Improper requisition from any department which is not required.

2) Improper handling of stock by the employee ie, Damage or theft

3) Deterioration in the quality of inventory over a long period of time.

To overcome the limitations the below methods can be followed.

1) Always issue the required amount of inventory when there is proper requisiton received and signed by the proper department whether it is production department (Manufacturing goods) or sales department (finished goods) and after we have to maintain the records of inventory and for this purpose below mentioned standard methods can be used

ie, When we deal with management of inventory with the value, there are various methods of maintaining inventory and major methods used in the management of the inventory are as follows;

1) FIFO (first in first out)

2) LIFO (Last in first out)

3) Weighted Average method.

But In-order to value of closing stock any business which comes under the provisions of audit then it has follow only 2 methods ie, FIFO And Weighted average method. LIFO is not allowed under such circumstances and each of the methods are having its own merits and de-merits where due consideration has to be given As per the requirements of the Business.

B) To protect the investment of the company, to see that there is NO excess or under amount is invested in the inventories, it has to perform calculations like: Re-order level, maximum level, minimum level, Danger level, Re-order stock quantity etc. If this above calculations are performed on timely basis then capital of t he company is protected and even production or demand of the company are not affected by adverse conditions.

C) Some of the stock taking methods are as follows:

Periodic stock varifications, On-spot verification, annual stock check, Perpetual stock taking methods are most commonly followed methods but the most effective one is Periodic stock taking methods which helps the company to see there is no-mismanagement between the accounting records and physical stock records, this method can be applied to both ie, company and grocery stores.

I hope above information is usefull, kindly provide your valuable feedback and like.

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