Page 12 - PowerPoint Presentation
P. 12
MANAGEMENT OF WORKING CAPITAL
The management of inventory
Objective: Maintain sufficient inventory levels to avoid running
out of inventory but to keep these levels as low as possible to
reduce holding costs.
• Used to decide the optimum order size for inventory which will
minimise the cost of ordering stocks and stockholding costs.
• Holding/carrying costs = holding cost per unit per annum x
average units on hand
o Average units on hand = (order quantity / 2) + safety stock
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