What Are The Advantages And Disadvantages Of Inventory Management

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Introduction of inventory management Inventory Management is planning, coordinating, and controlling activities related to the flow of inventory into, though, and out of an organization Inventory is an idle stock of physical goods that contain economic value, and are held in various forms by an organization in its custody awaiting packing, processing, transformation, use or sale in a future point of time. All organizations engaged in production or sale of products hold inventory in one form or other. Inventory can be in complete state or incomplete state. Inventory is held to facilitate future consumption, sale or further processing/value addition. All inventoried resources have economic value and can be considered as assets of the organization. Different types of inventory Raw material Work in progress Finished goods . A…show more content…
in sales volume. There is no under or over absorption of - All overhead have to be recovered, overhead. (Hence, no adjustment is require otherwise loss will be made. in the income statement) Advantages and Disadvantages of Absorption Costing Advantages Disadvantages Absorption costing includes an element - Not as useful in short term decision of fixed overhead in inventory values. making as marginal costing. Analyzing under/over absorption of - May provide less accurate basis for overhead is a useful exercise in controlling calculation of selling prices where cost of an organization. overheads are high and complex in nature.. 2.2. Modern costing

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