1. 1. Give the meaning of material control.
“Material control is a systematic control over purchasing, storing and consumption of materials,
so as to maintain a regular and timely supply of materials, at the same time, avoiding
overstocking.”
“Material control refers to the management function concerned with acquisition, storage, handling
and use of materials so as to minimise wastage and losses, derive maximum economy and establish
responsibility for various operations through physical checks, record keeping, accounting and
other devices.”
2. What are the two of level of material control?
Material control helps in making available the right type of materials at right time. For this purpose,
various material levels are set up such as: •Maximum level •Minimum level •Re-order level
•Danger level, etc.
3. Name the techniques of material control.
Techniques of Material Cost Control (11 Techniques)
• I. Level Setting:
• II. Economic Ordering Quantity:
• III. Just-in-Time Inventory System:
• IV. Stock Control through ABC Analysis:
• V. VED Analysis
• ABC Analysis
4. Name different levels of stores.
a) Re-ordering level
It is the level of stock quantity between minimum and maximum level and
material order was sent for getting fresh stock.
formula
maximum usage of stock X maximum delivery period
b) Minimum level
It is the minimum balance, which must be maintained in hand at all times, so that
there is no stoppage of production due to non availability of inventory.
2. Formula
Re-order level - ( Normal usage X average period )
c) Maximum level
It shows maximum quantity which should be in the stock, if we buy more, it
means we are wasting money.
formula
re-order level X re-order quantity - ( minimum usage X minimum period )
d) Average Stock Level
This is the average of minimum and maximum level and it can be calculated by
adding minimum level and maximum level and divided by 2.
formula
minimum level + maximum level / 2
e) Danger level
It is the level at which normal issues of the raw material inventory are stopped
and emergency issues are only made.
formula
average consumption X lead time for emergency purchases
5. What is reorder level?
6. What do you mean by maximum level and minimum level?
7. What do you mean by danger level and average level
8. What is perpetual inventory system?
The perpetual inventory system provides a detailed view of the changes in the inventory
with an immediate report of the amount of inventory in the stock and reflects the goods
level on hand accurately. The company does not make any effort within this system to keep
detailed inventory records of the products on hand.
9. What do you mean by ABC analysis?
In this Always Better Control technique of inventory control, the materials are classified and
controlled according to value of the materials involved. ‘A’ category consists of a few items of
high value. Category ‘B’ included more items of medium value and category ‘C’ includes all other
materials of small value.
3. 10. Find out EOQ from the following
Annual requirement 1600 units
Cost of material per unit Rs.40
Cost of placing & receiving one order Rs.50
Annual carrying cost of inventory 10% of inventory value
11. Calculate EOQ
Consumption during the year 600 units
Ordering cost Rs.12 per order
Carrying cost 20%
Price per unit Rs. 20
12. What do you mean by purchase order?
A purchase order (PO) is an official document that buyers send to sellers to document the sale
of products and services to be delivered at a late date. This allows buyers to place orders with
suppliers without immediately making payment.
13. What is bin card?
Bin Card is the statement or report of the issue and receipt of the stocks from a retailing business's
store department. ... It must be pointed out that the word 'Bin' in the term Bin Card is the short
form for Business Identification Number. It is also known as bin tag or stock card
14. What is LIFO?
The last in, first out, or LIFO (pronounced LIE-foe), accounting method assumes that sellable
assets, such as inventory, raw materials, or components, acquired most recently were sold first.
The last to be bought is assumed to be the first to be sold using this accounting method.
15. Explain stores ledger?
A stores ledger is a manual or computer record of the raw materials and production supplies
stored in a production facility. ... A stores ledger is particularly useful for maintaining a perpetual
inventory system, since it tracks the current quantity of items on hand.
16. What do you mean by FIFO?
First In, First Out (FIFO) is an accounting method in which assets purchased or acquired first
are disposed of first. FIFO assumes that the remaining inventory consists of items purchased last.
An alternative to FIFO, LIFO is an accounting method in which assets purchased or acquired last
are disposed of first
4. 17. Find out EOQ-Consumption of material (quarterly) 200 kgs
Cost of placing one order rs 50
Cost per unit rs 40
Storage and carrying cost 8% on average inventory
18. What is material requisition?
A material requisition, also known as a materials requisition form, or a material request, is a
document used by the production department to request materials they need to complete a
manufacturing process.
19. What is just in time inventory?
Just-in-Time (JIT) in Inventory Management is a form of inventory management that requires
working closely with suppliers so that raw materials arrive as production is scheduled to begin,
but no sooner. The goal is to have the minimum amount of inventory on hand to meet demand.
20. Explain base stock method.
The base stock method is a valuation technique for the inventory asset, where the minimum
amount of inventory needed to maintain operations is recorded at its acquisition cost, while the
LIFO method is applied to all additional inventory.
21. Write a short note on
(a) VED analysis
VED analysis is an inventory management technique that classifies inventory based on its
functional importance. It categorizes stock under three heads based on its importance and
necessity for an organization for production or any of its other activities. VED analysis stands for
Vital, Essential, and Desirable.
(b) FNSD analysis
Under FNSD analysis the stores items are divided under four categories. The basis of classification
is their usage rate. ‘F’ stands for fast moving items that are consumed quickly. ‘N’ stands for
normal moving items which are exhausted over a period of a year or so. ‘S’ stands for slow moving
items which are not consumed frequently but are expected to be exhausted over a period of two
years or more. ‘D’ stands for dead items and the consumption of such items is nil.
