Accounting for materials

Question 1

What do you mean by inventory amnagement? in brief

Answer 1

Inventory management is the process of efficiently overseeing and controlling a company’s inventory—ensuring the right quantity of stock is available at the right time to meet customer demand while minimizing holding costs. It involves tracking raw materials, work-in-progress, and finished goods to avoid stockouts or overstocking.

Question 2

what is economic order quantity in one or two sentences

Answer 2

Economic Order Quantity (EOQ) is the optimal order quantity that minimizes the total cost of inventory, including ordering costs and holding costs. It helps businesses determine the most cost-effective amount of inventory to order at a time.

Question 3

optimum investment in inventory is the main essence of inventory management clarify this statement with the help of objectives of inventory management

Answer 3

This means the goal of inventory management is to keep just the right amount of inventory—not too much and not too little—to run operations smoothly while keeping costs low.
1. Avoid overstocking and understocking – Holding too much inventory ties up money; too little can lead to stockouts and lost sales.
2. Minimize inventory holding costs – Such as storage, insurance, and spoilage.
3. Ensure smooth production and sales – By having materials and products available when needed.
4. Maximize return on investment (ROI) – Investing the right amount in inventory helps free up funds for other business needs.
5. Improve working capital efficiency– Optimizing inventory levels ensures that cash isn’t unnecessarily tied up.