Stock Taking Ch10

• What is the main topic of Term 4's chapters outline?


  Reverse logistics and stock taking
• What is stock taking?


  Stocktaking involves physically counting all stock and matching it to stock records to find discrepancies.
• Why is stock taking important?


  It helps identify inconsistencies between manual counts and electronic records, improving stock control and management.
• What are the reasons why every business should complete regular stock takes?


  1. Reduce theft
  2. Identify damaged stock
  3. Analyze product performance
  4. Improve stock ordering process
  5. Find faults in pricing strategies
• How can stock taking reduce theft?


  It highlights discrepancies that may indicate theft issues and encourages better security measures.
• How does stock taking help identify damaged stock?


  It reveals problems such as damaged pallets due to leaks, prompting necessary repairs or discarding of stock.
• What does stock taking reveal about product performance?


  It identifies which products are best and worst sellers, indicating potential dead stock.
• How does stock taking improve the stock ordering process?


  It highlights shortages that were previously unknown, prompting timely orders for more stock.
• How can stock taking help find faults in pricing strategies?


  It forces analysis of sales and profits, leading to necessary adjustments in pricing strategies.
• What are the methods of stock taking?


  1. Annually
  2. Spot Checking
  3. Cycle Counting
  4. ABC Classification
• What is the annual stock taking method?


  It involves counting stock at year-end, which can disrupt business operations.
• What is spot checking in stock taking?


  It involves randomly counting products and comparing them to expected counts at any time.
• What is cycle counting?


  It spreads stock reconciliation throughout the year by checking different products on a rotating schedule.
• What is ABC classification in inventory management?


  It categorizes inventory into three groups based on importance: A (most important), B (important), and C (least important).
• How do you calculate the annual consumption value of an item?

  Annual consumption value = annual number of units sold x cost per unit
• How do you determine the thresholds for ABC classification?


  The thresholds are unique to each company but typically approximate 80% for A, 15% for B, and 5% for C categories.
• What are the classes in ABC inventory management?


  • Class A: High dollar value (10%-20% of inventory, 70%-80% of consumption value)
  • Class B: Medium dollar value (30% of inventory, 15%-20% of consumption value)
  • Class C: Low dollar value (50% of inventory, 5% of consumption value)
• What is inventory turnover?


  Inventory turnover measures how many times products are sold and replaced in a given period.
• Why is inventory turnover significant?


  It helps optimize warehouse positioning and informs decisions about slow-moving inventory.
• How do you calculate the cost of goods sold (COGS)?


  COGS = Cost of inventory at the beginning + Purchases during the year - Cost of inventory at the end
• What is the COGS calculation example given in the material?


  COGS = R10,000 + R15,000 - R5,000 = R20,000
• How do you calculate average inventory?

  Average inventory = (Opening inventory + Closing inventory) / 2
• What is the average inventory calculation example given in the material?

  Average inventory = (R10,000 + R5,000) / 2 = R7,500
• How do you calculate the inventory turnover ratio?


  Inventory turnover = COGS ÷ Average inventory
• What is the inventory turnover ratio calculation example given in the material?


  Inventory turnover = R20,000 ÷ R7,500 = 2.7
• How do you calculate Days Sales in Inventory (DSI)?


  DSI = (Average inventory ÷ COGS) x 365
• What is the DSI calculation example given in the material?


  DSI = (R7,500 ÷ R20,000) x 365 = 136 days
• What is a good inventory turnover rate?


  A good inventory turnover rate is typically between 5 and 10 for most industries.
• How does the type of product affect inventory turnover rates?


  Fast-moving consumer goods should have higher turnover rates than slow-moving consumer goods.
• What is the class task related to turnover ratio?


  Calculate COGS, turnover ratio, and days sales inventory based on given inventory values.
• What is the COGS calculation example for the class task?


  COGS = R75,000 + R45,000 - R23,000
• What is the turnover ratio calculation example for the class task?

  Turnover ratio = COGS ÷ Average inventory
• What is the days sales inventory calculation example for the class task?

  Days sales inventory = (Average inventory ÷ COGS) x 365