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- Is a method use in ensuring the amount of stock level of every item could
be attained at all times? Usually, this involves recording all receipts, issues
and running balances for each item of the stock on the record card. This
system enables management to ascertain stock at any moment in time
without doing a physical stocktaking.
High value or A items would come under very strict control. Low value or
C items would be under visual or physical control and medium value or B
items require average control measures.
4) Briefly explain the terms “Economic Order Quantity “(EOQ). What are
the assumptions made in applying EOQ model ?
- It is the size of the purchase order, which minimizes the combined annual cost
which consist of placing orders, holding stock and purchase price (assumed that
price per unit is constant over a wide range). It can be calculated using the
following formula:
D = Total demand for material during a given period or the annual quantity used.
O = Cost of placing and receiving an order.
C = The annual cost of carrying one unit of material.