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Project Topic:

INVENTORY VALUATION AS AN AID TO MANUFACTURING INDUSTRY

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 Format: MS WORD ::   Chapters: 1-5 ::   Pages: 75 ::   Attributes: Questionnaire, Data Analysis  ::   41 people found this useful

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BUSINESS ADMINISTRATION UNDERGRADUATE PROJECT TOPICS, RESEARCH WORKS AND MATERIALS

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CHAPTER ONE

INTRODUCTION

BACKGROUND TO STUDY 

Numerous routine planning and control activities formerly performed by clerks have developed into sophisticated functions with far-reaching effects on corporate objectives and profits. Inventory valuation, as a vital element is one of such functions.

Inventory otherwise returned  to as stock can be defined as items of value held for use or sale by an enterprise and usually comprise of raw material supplied used  for production work in progress and finished goods at the end of an accounting period. Valuation on the other hand may be defined as “an element of management and estimation of financial values such like values of property, land, stock etc. 

Therefore, inventory valuation is simply the means by which merchandise materials goods in process, finished goods supplies

On hand are values by accounting method of valuation, it is the means by which the store ledger accounts of goods is debited with the value or amount of goods received or acquired and credited with the value of the goods disposal off or sole during the accounting period where as by physical method of valuation, it is the means by which the pans set for buying, storing, handling, issuing, supplies and stock ledger is made more effective by constant physical measures.

It will be more relevant to note that the value of inventory may be substantial, surpassing or only second to that of property plant and equipment depending valuation involves the calculation of items to be held, in stock, decision on the extend of stock, holding of the items individually and collectively, the regulation of the impact of items in the store house and their issues. By the above mentioned processes, it will be possible to adjust continuously the quantity and value held to conform to circumstances at all times.

The manufacturing companies therefore have a lot of factors which comprise the cost of storage as interest on value of store in stock determination of stock obsolescence, recording and accounting etc. it may be very clear that only an efficient application of standard management or management by objective will help to avoid the discrepancies encountered by many companies valuing their inventories. For cost accounting system to be fully of material from the time order is placed with supplies until the material is used to production.

The importance altitude to valuation of inventory is emphasized in paragraph 11 of schedule 2 of the company act of 1968. It states’ if the amount carried forward for stock in trade or WNK work- in progress is material for the appreciation by its members of the companies state of affairs or its profit and loss form the financial year the manner in which the amount has been computed must be stated.

However, it is clear that no single method of inventory valuation is suitable to all business firms unless the method adopted is suitable and appropriated to the circumstance of a particular business firm and used consistently institute of chartered accountants contains guidelines on stock valuation and the following are extracts therefrom.

The elements making up cost of stock are direct expenditure on the purchase of goods bought for resale and of material and components used in the manufacturing of goods finished.

Other direct expenditure which can be identified specifically as having been to acquire the stock or bring it to its present location examples are direct labour, transportation processing and packaging, such cost if any of the overhead expenditure is properly carried forward in the circumstance of business instead of being charged against the revenue of the period in which it was incurred. Overhead expertise’s may be divided into production administration selling and finance expressed and other charges, which relate to bring the stock to its existing location and condition.

The fragment movement of physical item into and out of inventory is the charges in unit costs complicating the accounting for inventories and cost of goods sold. 

The questions now is, what costs should be include in computing the naira 9monetary) value of inventories. There does not seen to be a clear cut line of distinction between in enterable necessary for obtaining the inventory and placing it into storage which is reasonably charged into inventory. 

Thus the cost arising from inefficiency or prolonged storage of item in inventory and periodic charges. To include these costs in assets, balance could easily result in the cost being greater them any reasonable measure of value. Form a practical point of view, it is not unreasonable for a merchandising firm to place into the inventory account only the net invoice price, freight and the handling costs of placing the merchandise in its storage other cost would be normally considered as expresses of the period.

Inventory records are only a means to an end of inventory Valuation Company has thousands of impressive store card whose balance are always in precise agreement with physical courts taker in its immediate store room. But desperate enrolls paper shuffling efficient employees. Inventory valuation may still be inadequate. Hence the management duty is not clerical accuracy but proper valuation and control.

The Tea-time bread industry limited Enugu has its major objectives like other ente4rprise profit maximization. This company was established to employ members of the public both directly and indirectly. By indirect employment the research means the staff of the company whereas by indirect the research means distributor and other dependents on the service of the company

STATEMENT OF PROBLEM

(1)        Inventory valuation is not efficiently and effectively practiced in the firm. 

There is no adequate orientation to inventory valuation.

There is no consisted use of one system of inventory valuation.

Stock taking is done at will instead of periodically, quarterly or yearly.

When stock taking occurs there is no measure for error control.

OBJECTIVES/ PURPOSE OF STUDY

To determine the extent to which Tea-Time bread industry has incorporated inventory valuation. 

To find out the extent the valuation method has helped in a ring at good management decision. 

To what way does Tea-Time Bread industry helped to reduce the unemployment problem within our nation, Nigeria.

To determine whether or not practice of the valuation system is of benefit to the organization

To determine whether or not practice of the valuation system is of benefit to the organization.

 SIGNIFICANCE OF THE STUDY

The business environment is becoming very dynamic and competition for business organization survive  in a rapidly changing environment management must keep abreast of the proper direction in order to arrive at this management requires adequate and timely ideas or information that would enable plan for the attainment of pre – determined objectives. This study will be of value of management, employees and owners of business organizations because of its reevaluation on.

The need to consider immentory valuation of part of the role in order to build up the organization.

How to improve the valuation method by ensuring that the company practices the valuation method efficiency and consistency.

Having this at the back of my mind, this study therefore will bring to the knowledge of our management (Tea – Time bread industry) Enugu the numerous solutions to their problems being encountered by stock or inventory management. The study will also help to produce reliable costing information as regards to the records of materials issued.

If production and delivery of goods were instance Laneous, there would be no need for inventory of stock expect as a hedge against price changes. Therefore inventory must be maintained so that customers may be serviced immediately or at least guidely enough so that the customer does not turn to other sources of supply.

Finally, production operation cannot flow smoothly without having inventories of direct materials work – in- progress, finished goods and supplies.

 RESEARCH QUESTIONS

To what extent has the tea – time bread industry incorporated inventory valuation in their production?

To what extent has valuation method contributed in taking good management decision?

What are the benefits of inventory valuation to a bread manufacturing industry like tea time bread?

To what extent has the tea – time bread industry helped to reduce the unemployment problem in Nigeria?

DIRECT MATERIALS: The raw materials that become an integral part of the finished product and are significant enough to warrant tracing them from raw material to finished goods.

SCOPE TO STUDY

            This research work concerned the inventory valuation as an aid to manufacturing company reference to tea-time bread industry limited. However, as a result to the finance and time constraint the research from her proper investigation, find it difficult.

            Actually, the research only studied the tea – time bread industry limited which formed her research unit. Furthermore, the researcher concentrated on the study mainly on production department and the administration department question which will be of help for a meaningful research work. Below are some of the designed questions.

Does the system of inventory valuation in your organization receive adequate attention as to permit effective efficient practice?

Do you opinion that there is adequate orientation to inventory valuation

Is there any designed period of inventory valuation in your organization?

At the time of inventory valuation in practice in your organization (if not all) is there any measure designed for error control.

DEFINITION OF TERMS

RAW MATERIAL: This is the material or component used in price or sum of the applicable expenditure and charges directly incurred in bringing articles to us existing location.

FINISHED GOODS: these units of goods that are completed and awaited for sales.

WORK – IN – PROGRESS: This is partly finished goods that can be conveniently classified in this category.

ORDER: To request for something to bring made in return for payment.

GOOD RECEIVED NOTE: This shows the date the supplies name, purchase order, quality and description of the goods, their condition on arrival and details of returnable packing materials and its signed by the checker.

CREDIT: A bookkeeping entry recording entry the reduction or limitation of an asset or an expense.

DEBIT: A bookkeeping entry recording the income of or addition to an asset or an expense.

BIN – CARD: This is the card used by a storekeeper to record the movement of the stock. It shows the description code number, maximum number, minimum number, reorder level and quality and balance of stock in hand.

VENDOR: A vendor is a supplier or seller of goods to the company.

MANAGEMENT: Is the controller and organization of business.

NET RELIABLE VALUE: This is the estimate of proceeds from sales less all additional costs incurred to the point of completion marketing, selling and distribution of an item of stock.

REPLACEMENT VALUE: This is the case of stock raw materials and purchased part and what it would cost to purchase similar qualities at the market price ruling on the date of the balance sheet.

MOVE TIME: The time taken in transporting the goods to the rent processing location.

UCUE TIME: The amount the time job spends awaiting to be worked on.

LEAD TIME: The time required after placing or order or adopting a plan of operation or production before materials and facilities can be acquired and made ready and actual production initiated.

SET UP TIME: Preparing to run a job in a machine.

MARGIN OF SAFETY: The excess of sale over the break-even sales volume expressed as naira or in quality (unit or as a ratio).

PERIODIC INVENTORY SYSTEM: A system of accounting for merchandise in which inventory at the balance sheet date is determined by counting and pricing the goods on hand.

PERPETUAL INVENTORY SYSTEM: A system for merchandise that provides continuous records showing the quality and cost of all goods on hand.

inventoriable: Assets that cannot be immediately assigned to inventory.

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