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Planning and Controlling Purchases and Materials Usage - Essay Example
Finance & Accounting
Pages 6 (1506 words)
Planning and Controlling Purchases and Materials Usage Table of contents Introduction 2 Importance of study 2 Analysis 5 Conclusion 7 References 9 Planning and Controlling Purchases and Materials Usage Introduction “Eagle Home Products” is a medium sized company engaged in manufacturing of home appliances of various types and sizes for local market and exports…
Budgeting is an important tool adopted by the company for planning and controlling purchases and materials usage. Sales forecast is the basis for planning and budgeting after carefully considering various factors such as capacity available and product mix. Since inventory involves significant investment, keeping it at an optimum level is very important for controlling cost. Material requirement planning is carried out in line with the production schedule for the year. Importance of study Home appliances market is very competitive. The company’s products face stiff competition from the products imported from China and Japan. The company is under tremendous pressure to ensure quality of its products and make improvements to maintain its market share. The company focuses on ‘planning and controlling purchases and materials usage’ with a view to bring down the cost of production to make its products more competitive in the market. The main objective of inventory planning is to keep the investment low for reducing the interest cost. The inventory can be classified into three categories. 1. Raw materials 2. Components purchased for assembly 3. ...