Question

We are reading Financial Accounting, Ch. 6: Reporting and Analyzing Inventory and below I am having difficulty with.

What are some inventory classification methods​?

Answer 1

Answere;-

Inventory is necessary for every organisations engaged in production of products, trading and sales. Inventory are in various form such as Raw Material, Finished Goods and Spares. In business it is important to practice the periodic inventory analysis to have a better inventory control, to protect valuable assets and help improve the policies for inventory control   

The most important benefit a business can achieve from inventory analysis is the Rate on Investment, ROI is the deciding factor that determine whether a company’s money rules are met and if it is still worth continuing its operation. Inventory control are engaged in managing inventory, Management involves several critical areas such as focus of inventory control is to maintain optimum inventory levels and determine order, schedules and quantities. The manager try to balance inventory all the time and maintain optimum level to void excess inventory or lower inventory, which can cause damage to its business.