 Inventory includes: -stock of raw materials -stock of work in progress -stock of finished goods -stock of spares

 REORDERING LEVEL  MINIMUM/SAFETY LEVEL  MAXIMUM LEVEL  DANGER LEVEL  AVERAGE STOCK LEVEL

 Firm should go for fresh purchase of requisition of material  REORDERING LEVEL Maximum Consumption X Maximum Reorder Period

 Minimum amount of materials in hand to facilitate the flow of production process.  MINIMUM LEVEL Reorder level-(Normal level consumption X Normal Reorder period)

 Firms holds maximum quantity of materials as stock during the process.  MAXIMUM LEVEL Reorder level+ Reorder Qty. - (Minimum Consumption X Minimum Reorder Period)

 At this level, the firm should not further issue any materials to the various functional departments.  DANGER LEVEL Average Consumption X Maximum Reorder Period Average Consumption = (Min. Consumption level+ Max. Consumption level)/2

 AVERAGE STOCK LEVEL Minimum Stock level + ½ of the reorder qty.

 EOQ is the level at which both Ordering & Carrying costs are minimum.  Ordering costs per order decreases with an increase in no. of units in an order.  Carrying costs increases with an increase in no. of units in an order.

 Record prepared by the storekeeper  at the moment of  Issuing and Receiving of materials.  Types 1. Two Bin Card System 2. Three Bin Card System

 Two Bin Card System One bin card should be maintained for reorder level & minimum level another for maximum stock level.  Three Bin Card System Incorporates the Lead time stock level in addition to Maximum, Reorder and Minimum Level of the stock

 Prepared by Costing Department of the firm.  It records the issues and receipts of materials at par with the Bin Card system & also the value of materials.

 ABC Analysis  VED Analysis

 A- Always  B- Better  C- Control A- High control for High value goods B- Moderate control for Lesser value goods C- Little control for Least value goods

 V- Vital  E- Essential  D- Desirable - The spare parts are classified as above in accordance to the criticality of production