BUAD306 Study Guide - Final Guide: Cost Accounting, Profit Margin, Transaction Processing

• School: University of Delaware
• Department: Business Administration
• Course: BUAD306
• Professor: Susan Murphy

Document Summary

Independent-demand items- items that are ready to be sold or used. Dependent-demand items- components of finished products, rather than the finished product themselves. Some very large firms have tremendous amounts of inventory. 30% of its current assets in inventory and as much as 90% of its working capital invested in inventory. The major source of revenues for retail and wholesale businesses is the sale of merchandise (inventory). The inventory of goods held for sale is one of the largest assets of a merchandising business. Objectives of inventory control- inadequate control of inventories can result in both under and overstocking of items. Understocking results in wrong deliveries, lost sales, dissatisfied customers, and production bottlenecks; overstocking unnecessarily ties up funds that might be more productive elsewhere. This is the annual cost of goods sold to average inventory investment (how much you bought). The higher the ratio, the better because that implies more efficient use of inventory.