FORMULAS IN INVENTORY
Calculate the turnover rates for raw material, WIP, and finished goods using these formulas:
GUIDELINES FOR FORECASTING TECHNIQUES
The formula for exponential smoothing is:
- Regeneration. This technique involves discarding the old forecast and substituting a new one. This technique is generally appropriate where there are widely varying forecasts and relatively few inventory levels.
- Net change. This technique involves updating only those items for which a forecast change is indicated (either in quantities or timing). This technique is generally appropriate where there are few changes and many levels in the bills of materials.
KEY CONCEPTS TO REMEMBER: Inventory Control
- If controls over the perpetual inventory system are weak, a good recommendation is to schedule a physical inventory count.
- Statistical sampling would be appropriate to estimate the value of a firm's inventory because statistical sampling is reliable and objective.
- During an investigation of unexplained inventory shrinkage, the auditor is testing inventory additions as recorded in the perpetual inventory records. Because of internal control weaknesses, the information recorded on ...