Budgeting and Inventory Control

1. Budgeting and Inventory Control MSE 504, Group #2 Arnulfo Barreda Pouya Dehghani Niloofar Khatibi Michelle Milloy Curtis Pederson Mike Romiski

2. Budgeting and Inventory Control Both deal with overall cost control and planning to use resources in appropriate ways: Budgeting - The process of planning and controlling the use of assets in business activities. • Benefits of Inventory Budgeting • Inventory Budget Considerations Inventory Control - The process of managing the timing and the quantities of goods to be ordered and stocked, so that demands can be met satisfactorily and economically • Methods of Inventory Control • Inventory Control Records • Steps to Control Inventory • Benefits of Controlling Inventory Niloofar Khatibi

3. Budgeting • Inventory budgets allow companies or firms to avoid inventory obsolescence and wasted capitol from useless goods. • industries use inventory budgets in order to make inventory decisions, and the budgets can be made for specific products produced or for specific purchasing seasons. • If a company purchases too much inventory that must be sold in a specific time frame it forces the business to liquidate the inventory at much less than the full price. • Budgets also help new purchasing managers make better decisions regarding which products they choose to purchase. • Benefit of inventory purchasing budgeting is finding the lowest cost inventory. Curtis Pederson

4. Inventory Budget Considerations • Being conscious of the fact that the amount of stock the business requires can change the value of the spenditure • After the inventory budget have been set, companies will determine the cost of goods sold for the budgeted income statement. • Determine how many units it has on hand and how many units it wants at the end of the year. • Direct material budget to determines the amount of additional materials that are needed to meet the projected production levels. • Direct labor budget is also very important in the inventory • process, as it determines the number of direct labor hours • needed in order to meets the forecasted inventory demand. Michelle Milloy

5. Inventory Control Methods of Inventory Control • The Eyeball System • The reserve stock system • Perpetual inventory systems • The Stock control Inventory Control Records • Perpetual inventory control records • Out-of-stock sheets • Open-to-buy records • Purchase order files Steps to Control Inventory • Inventory Planning • Establishing order cycles • Balance Inventory Levels • Review Stocks • Follow-up and Control Mike Romiski

6. Benefits of Controlling Inventory • Keeps the overall costs associated with having inventory as low as possible without creating problems. • Inventory control is a delicate balance at all times between having too much and too little in order to maximize profits • Helps balance the stock as to value, size, color, style, and • price line in proportion to demand or sales trends. • Help plan the winners as well as move slow sellers • Helps secure the best rate of stock turnover for each item. • Helps reduce expenses and markdowns. • Helps maintain a business reputation for always having • new, fresh merchandise in wanted sizes and colors. Pouya Dehghani

7. Budgeting vs. Inventory Control “Budgets are an important tool for managing various functions in a business. Company managers may have annual budget meetings where they discuss the budgets and how much money is to be spent on certain items.” Facts Types Significance Considerations Warnings Arnulfo Barreda