Inventory and Warehousing Cycle Due to the size of the balances and the complexity of the transactions involved in the inventory cycle, this is one of the most difficult and time-consuming parts of the audit process. Factors which contribute to the difficulty of this cycle include: different locations, diversity of items, estimation of inventory value, and estimation of obsolescence [ (Arens, Elder, & Beasley, 2006, p. 682) ]. “The inventory and warehousing cycles can be thought of as comprising two separate but closely related systems, one involving the physical flow of goods and the other the related costs” [ (Arens, Elder, & Beasley, 2006, pp. 682-683) ]. There are four types of transactions involved in the inventory and warehousing cycle of Apollo Shoes, Inc., ordering of goods for sale, receipt of the ordered goods, storage of the merchandise, and the shipping of goods to customers.
Behavioral constraints Behavioral constraints are a negative form of action control. They make it impossible, or at least more difficult, for employees to do things that should not be done. The constraints can be applied physically or administratively. Most companies use multiple forms of physical constraints, including locks on desks, computer passwords, and limits on access to areas where valuable inventories and sensitive information are kept. Some behavioral constraint devices are technically sophisticated and often expensive, such as magnetic identification card readers and fingerprint or eyeball pattern readers.
Information is subject to delay, forecasting is always subjective, as each firm uses different techniques, and the order quantity for a future period very often includes a very subjective “hunch” on the part of the planner. A retailer will forecast what
Use the following data to prepare a proposal using a balanced scorecard approach to demonstrate the project’s value to Centervale Apparel. Here is your brief: Business Problem: The order fulfillment team has been using several legacy technology systems to manage inventory and distribution. The current systems do not work together, requiring redundant information input and processing. Because of the redundant processes, work is duplicated requiring multiple data entry points and sometimes results in inaccurate and irreconcilable data. There is a constant overage or shortage of supply due to the time it takes for data to get from one point to another.
This interfacing can be difficult between legacy systems and an ERP system since they may use quite dissimilar technologies. Another consideration in adopting an ERP system is the cost. ERP systems are very expensive and require considerable consultant time to configure for your specific company, which also adds to the cost. There will also be significant training for your company staff to learn the new system. And there is a very good possibility that you will have to change your business process to conform to the ERP system.
What better results can we expect? It’s nearly impossible to make an accurate forecast of the demand, and the attached problems are either stock-outs or markdowns, which indicates the loss of manufacturing cost or sales revenues. What’s more, the large lot sizes required by manufacturers put further restrictions on Obermeyer’s ability to respond to the uncertain demand. As for the supply, Obermeyer is suffering from long lead times, due to limited supplier capacity. The lead times of most raw materials can be more than 45 days, some even 90 days or longer which highly constrain Obermeyer’s production ability.
The accrual method works best for these businesses because revenues and expenses can be balanced at the end of every reporting period. They simply need to refer back to the account when cash is paid and make an adjustment entry. The accrual method is most notable for its accuracy in reporting transactions. Accountants must adhere to what is known as the generally accepted accounting principles or GAAP. The accrual method is GAAP compliant because it follows the revenue recognition principle which states that each financial transaction must be reported in the accounting period in which it occurs.
1. What caused the difficulties that the JITD program was created to solve? The problems that JITD intended to solve: ● Demand fluctuation: Barilla suffered increasing operational efficiencies and cost penalties that resulted from large week to week variations in its distributors’ order patterns. According to the Exhibit 12 , the demand variability was huge so it was very difficult for the whole supply chain to forecast the demand and order accordingly. ● Furthermore, the production line of Barilla had a long setup/change process and was highly automated as well.
However, according to Chase, Jacobs, and Aquilano (2005), "All inventory systems are plagued by two major problems: maintaining adequate control over each inventory item and ensuring that accurate records of stock on hand are kept" (p. 609). The three simple inventory control systems widely used are: optional replenishment system, two-bin system, and one-bin system (Chase, et al., 2005). Maintaining inventory by the methods of counting, placing orders, receiving materials and such takes up a great deal of time and resources;
Again, we are told about the variation in the cost of components, particularly of imported steel and IT. Steel, being a main commodity, will undergo rapid fluctuations in price which are not always predictable. Any imported items will be subject to fluctuations in price caused by exchange rate changes which are again difficult to predict. In addition, the rising reject rate will effectively increase the costs of production, which again will limit the usefulness of the break-even data. FIF produces lots of products and so it will be difficult to monitor them all using break-even analysis.