Section B
Question 5
(a) List four methods of taking inventory.
(b) Explain each of the following types of inventory:
- finished product inventory;
- raw material inventory;
- maintenance inventory;
- work in-process inventory.
Observation
This question was problematic for the candidates. The required responses to the various parts of the question are:
(a) Four methods of taking inventory
- Manual counts;
- Perpetual method;
- Periodic method;
- ABC or pareto method.
(b) (i) Finished product inventory
There are stock of goods that have gone through the
production process and are ready for purchase by the final
consumers. Such stock could be kept by the manufacturer
after production for sale.
(ii) Raw material inventory
These are stock of unprocessed materials procured by a
manufacturer for the production of finished goods.
Such inventories are procured in their unprocessed state and would have to go through the production process to turn them to finished goods. Examples of such products are flour, maize used in producing bread and animal feed.
(iii) Maintenance inventory
Inventory that consists of items consumed in the day-to-day activities of a business for typical service organisation, examples include paper, diskettes, forms for keeping records and receipts. Manufacturing organisations use maintenance inventories such as lubricants, tools and repair parts.
(iv) Work-in-progress inventory
These are stock of materials that have been put into the production process. Such materials are neither raw materials nor finished products because they have been put into the production process but have not been turned into finished goods.