CHAPTER ONE
INTRODUCTION
- BACKGROUND OF STUDY
Inventory valuation, management and control is the system designed by the management of a firm to control it’s investment in stock.
This is found to be in existence in Emenite limited, Emene, which produces roofing sheets and hard boards for ceiling.
The system involves the recording and monitoring of stock levels, knowing when to orders and how many orders to be placed.
Effective, efficient and Economic inventory helps to check the following costs.
- Carrying cost which include interest on capital invested in stock.
- Storage charges
- Store staffing
- Material handling cost
- transportation cost
Since management needs information on inventory as a guide to decision making, inventory handling should not be placed on the basic of trial and Arrow.
Material control is an act of management which ensures the provision of the required quality quantity of inventories of the required quantity at the required time. With the minimum amount of capital tied up. It embraces stock control procedure, placing of purchasing, receiving, inspecting, storing requirement and issuing of stocks.
It is an important and difficult task.
Inventories are necessary in order to satisfy ever yawing needs of customers and smooth running of an organization, most organizations invest in large number of inventory items, irrespective of place for everything and everything in it’s place for the stock keeping system to operate effacing.
Floor space is very expensive and must be used to the build warehouse for storing materials and provide things for feasible, bin racks and shows must all be provided.
Is there no between def of inventory valuation?
- STATEMENT OF PROBLEMS
Problems of stock valuation, its management and control exists in almost all firm except service oriented organizations. The problems arise from the fact most organization (mainly manufacturing companies) based their stock control on human judgment approach rather than applying modern scientific models like recorder levels which removes entirely all elements of bias in determining stock levels, lead time provision, Economic order quantity (EDQ) and other relevant inventory models are consciously Ignored.
The relative degree of weakness of the internal control system with respect to stock, leaves much to be desired especially in the management and the control aspect of most firms.
Furthermore, indiscriminate placing of orders in creases the ordering costs. Also, buying in bulk over above the economic order quaintly (EOQ) increases holding costs.
The total of the invoice price of the inventory plus other incidental cost associated with ordering and holding cost give the value of the inventory.
Streamlining these costs and proper valuation of inventories is the problem this study is expected to solve for Emenite limited.
1.3 PURPOSE OF THE STUDY
- This very research is conduction to enable companies with trading and manufacturing Orientation to see the effective models. Examples, minimum stock level, economic order quantity (E.O.Q) etc. of inventory control and effect they have on the reported profit of an enterprise.
This have affected many comprise because of carefree attitude towards stock control.
On a more general basis, the over all objective of the research is as itemized bellows.
- To ascertain the modern inventory control techniques (if any) which the company uses during this period of economic recession (S.A.P)
- To evaluate the system of material control with respect to stock.
- To determine whether sales forecast can be made with relative degree of certainly.
- To determine a better approach to inventory valuation, recording and control.
- Finally, to offer useful suggestion on how management can make decisions and solve problems associated with inventories .
- Qualified staff are the people that ascertain how Emenite Limited determine their re-order point and achieve safety of stock level.
1.4 SCOPE OF THE STUDY
This research has to do with an industrial sector known as Emenite Limited, Enugu.
The research is mainly concerned with the following points:
- To investigate into the purpose of inventory control
- To investigate and find out if the company keeps appropriate internal control system in relation to inventory.
- To ascertain if the method of stock valuation can affect the company’s profit and loss and balance. Sheets
- To ascertain there are proper security covering handing handling and storage of stocks.
1.5 RESEARCH QUESTIONS
A Does the company use scientific method of inventory like buffer level, maximum stock level?
B is there proper security covering handling and storage of stock?
C Are there procedures for receiving materials ordered?
1.6 RESEARCH HYPOTHESIS
The research hypothesis is made to test the reality and correctness of the questions contained in inventory valuation, management and control in manufacturing organizations.
The research question can only be corrected when they have been tested and proved to be corrected.
This work is designed to test the following Hypothesis:
Ho: The company uses scientific method of inventory like buffer level, maximum stock level etc.
H1: The company uses scientific method of inventory like buffer level, maximum stock level etc
HO: There is no proper security covering handling and storage of stocks.
H1: There is proper security covering hurdling and storage of stock
Ho: There is no procedure for receiving materials ordered.
H1: There is procedure for receiving material ordered
Ho: There are no purposes of inventory control in Emenite Enugu
H1: There are purpose of inventory control in Emenite Enugu.
1.7 SIGNIFICANCE OF THE STUDY
Inventory control in modern business period, such as a mouth, quarterly, semi-annually and annually inventories compromise a significant portion of the assets of many companies, hence, the valuation and presentation inventories have a considerable effect in the determination and presentation of the financial position and the result operations of those enterprises.
The study makes it crystal dear why it is necessary for companies and individual to control their inventories such reasons as to minimize carrying case, regulate the quantities of stock on hand etc.
Also, by this study an opportunity is created for existing and prospective business from the use of modern inventory control techniques.
Finally, to any user of this research the readers, it will improve a great part, their theoretical and practical knowledge about inventory valuation control and management.
- LIMITATION OF THE STUDY
This research work faces a number of problems which includes; financial problem attitude of respondents time constraint and lack of related literature.
The above constraints are hereunder explained to show the influence of each on the research.
- LACK OF RELATED LITERATURE
The researcher was able to go through some of the related literatures. But the works are so out dated and are basically more of theory than practical. Hence, the researcher was unable to finalize works that can be department of an organization cannot be found in any text.
- ATTITUDE OF RESPONDENTS
The knowledgeable respondents who are mainly top mangers of the very few companies the researcher visited are not always available and if available are not easily accessible to provide the necessary information required.
In addition, some who are ever accessible, Deem the information two secret to be divined probable for fear of selling their strategies to competitions.
- INADEQUATE FINANCE
The researcher faced a lot of financial constraints due mainly to the fact that the continuo’s fall in the value of the naira has made the budgeted sum for the research work.
So insufficient that it affected the extent of data collection, all the places mapped out to be visited were not covered due to inadequate finance.
- TIME CONSTRAINTS
The fact that the study had to be undertaking alone side with normal lectures, the effort of the researcher, more often than not the researcher had to ignore some lectures the other to meet up with appointments in connection with the study.
Inspire of the above mentioned constraints, the researcher still was to carryout an objective study to arrive at a logical conclusions.
- DEFINITION OF TERMS
1 INVENTORY: it is stock of products the company deals on or manufactures and components that makes up the product.
2 CONTROL: This is the act of selling performance (expected) and monitoring actual performance against standard”.
The primary concern in management of stock control must be to provide the rights goods in the right condition at the right price in right place at the right time.
3 INVENTORY CONTROL: The regulation of quantities of material on hand in such a way as to ensure current needs while avoiding excess reserve stock, the calculation being based on the rate of issues and time necessary for replenishment.
4 SAFETY STOCK: This is the quantity of stock added to the expected demand (quantity) during the lead time to take care of fluctuations in demand and lead time variations.
5 CARRYING COST: This is the cost of inventory storage handing and insurance together with required rate of reform in invested inventory.
This cost includes floor-space, racks, bins, securing guides, maintenance etc.
6 ORDERING COST: These are entire cost a of acquiring, material stock. Generally, they are costs which are incurred in requisitioning purchase ordering, transportation, received, inspecting and storing.
7 STOCKS RECORDS CARDS: these are cards for each item in the stock and they show names of products, quantities received, issued, balance and prices.
8 BASE STOCK: It is the minimum quantity of raw materials or other goods, without which they the company cannot operate their plants or conduct their operations. It is at times treated as being a fixed assets which is under constant renewal by charges to revenue.
REFERENCE
BATTY J (1978) Advance cost Accounting U.S.A Maldrenld and Evans ltd 2nd Edition .
MILLER G.J. (1979) material management who needs them U.S.A Harvard business review July
INANGA E.L (1982) principle of accounting Nigeria Heinemann press pg 15.
LANAR .L.J. (1976) purchasing and material management case George town home wood ill minions Irish Dorsey ltd.
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