Project Topics

INVENTORY VALUATION AS AN AID TO MANUFACTURING INDUSTRY

INVENTORY
VALUATION AS AN AID TO MANUFACTURING INDUSTRY

(A CASE STUDY
OF TEA- TIME PORTED INDUSTRY ENUGU)

 

ABSTRACT

 

The purpose of this topic or study inventory valuation as aid to
manufacturing industry with reference to Tea Time bread industry Enugu. This is to
highlight on the importance that our industries can perform effectively and
efficiently as it concern’s inventory or stock valuation.

To quite this study four research question were formulated a review of
literature was done to ensure solid and more elaboration for the study. A
structural questionnaire was densely and administered, the research distribute
to questionnaire to the employees of tea- Time Bread industry while 35inene
natural collected.

Based on the above some of the above some of the major finding include
presentation of data and them analysis. The analyses were done on two
categories the general questionnaires sent and structural personnel inter
views. And finally, chapter fine discussed all the finding of the result made
by the researcher and recommendation as well as conclusion.

However, the research will as a matter of fact add the importance of
inventory valuation in an industry of Tea-time Bread.

TABLE OF
CONTENTS

                                               

Title page                                                                               

Approval page                                                                       

Dedication                                                           

Acknowledgement                                                        

Abstract                                                                                  

Table of contents

                                                           

CHAPTER ONE 

INTRODUCTION

1.0     Background to the Study

1.2     Statement of Problem

1.3     Objective/ Purpose of Study

1.4     Significance of the Study

1.5     Research Question

1.6     Definition of Terms

1.7     Scope of Study

CHAPTER TWO

Literature
reveal method of valuation

Summary of related literature  

CHAPTER THREE

3.0     Research methodology

3.1     Design of the study

3.2     Area of study

3.3     Population of the study

3.4     Sample and sampling
procedure

3.5     Instrument for date
collection

3.6     Validation of the research
instrument

3.7     Reliability of the research
instrument

3.8     Method of data analysis

 

CHAPTER FOUR

Presentation and Analysis of Data or Results

 

CHAPTER FIVE

5.0     Discussion of the Result                                      

5.2     Conclusion                                                          

5.3     Implication of the Research             

5.4     Recommendations                                               

5.5     Suggestion for Further
Research      

5.6     Limitation of the Study                             

          Reference                                                             

        Appendix                                                                                 

 

 

CHAPTER ONE

 

INTRODUCTION

BACKGROUND TO STUDY 

Numerous routine planning and control activities formerly performed by
clerks have developed into sophisticated functions with far reaching effects on
corporate objectives and profits. Inventory valuation, as a vital element is
one of such functions.

Inventory otherwise returned  to as
stock can be defined as items of value held for use or sale by an enterprise
and usually comprise of raw material supplied used  for production work in progress and finished
goods at the end of an accounting period. Valuation on the other hand may be
defined as “an element of management and estimation of financial values such
like values of property, land, stock etc. 

Therefore, inventory valuation is simply the means by which merchandise
materials goods in process, finished goods supplies

On hand are values by accounting method of valuation, it is the means by
which the store ledger accounts of goods is debited with the value or amount of
goods received or acquired and credited with the value of the goods disposal
off or sole during the accounting period where as by physical method of
valuation, it is the means by which the pans set for buying, storing, handling,
issuing, supplies and stock ledger is made more effective by constant physical
measures.

It will be more relevant to note that the value of inventory may be
substantial, surpassing or only second to that of property plant and equipment depending
valuation involves the calculation of items to be held, in stock, decision on
the extend of stock, holding of the items individually and collectively, the
regulation of the impact of items in the store house and their issues. By the
above mentioned processes, it will be possible to adjust continuously the
quantity and value held to conform to circumstances at all times.

The manufacturing companies therefore have a lot of factors which
comprise the cost of storage as interest on value of store in stock
determination of stock obsolescence, recording and accounting etc. it may be
very clear that only an efficient application of standard management or
management by objective will help to avoid the discrepancies encountered by
many companies valuing their inventories. For cost accounting system to be
fully of material from the time order is placed with supplies until the
material is used to production.

The importance altitude to valuation of inventory is emphasized in
paragraph 11 of schedule 2 of the company act of 1968. It states’ if the amount
carried forward for stock in trade or WNK work- in progress is material for the
appreciation by its members of the companies state of affairs or its profit and
loss form the financial year the manner in which the amount has been computed
must be stated.

However, it is clear that no single method of inventory valuation is
suitable to all business firms unless the method adopted is suitable and
appropriated to the circumstance of a particular business firm and used
consistently institute of chartered accountants contains guidelines on stock
valuation and the following are extracts therefrom.

The elements making up cost of stock are direct expenditure on the
purchase of goods bought for resale and of material and components used in the
manufacturing of goods finished.

Other direct expenditure which can be identified specifically as having
been to acquire the stock or bring it to its present location examples are
direct labour, transportation processing and packaging, such cost if any of the
overhead expenditure is properly carried forward in the circumstance of
business instead of being charged against the revenue of the period in which it
was incurred. Overhead expertise’s may be divided into production
administration selling and finance expressed and other charges, which relate to
bring the stock to its existing location and condition.

The fragment movement of physical item into and out of inventory is the
charges in unit costs complicating the accounting for inventories and cost of
goods sold. 

The questions now is, what costs should be include in computing the naira
9monetary) value of inventories. There does not seen to be a clear cut line of
distinction between in enterable necessary for obtaining the inventory and
placing it into storage which is reasonably charged into inventory. 

Thus the cost arising from inefficiency or prolonged storage of item in
inventory and periodic charges. To include these costs in assets, balance could
easily result in the cost being greater them any reasonable measure of value.
Form a practical point of view, it is not unreasonable for a merchandising firm
to place into the inventory account only the net invoice price, freight and the
handling costs of placing the merchandise in its storage other cost would be
normally considered as expresses of the period.

Inventory records are only a means to an end of inventory Valuation
Company has thousands of impressive store card whose balance are always in
precise agreement with physical courts taker in its immediate store room. But
desperate enrolls paper shuffling efficient employees. Inventory valuation may
still be inadequate. Hence the management duty is not clerical accuracy but
proper valuation and control.

The Tea-time bread industry limited Enugu
has its major objectives like other ente4rprise profit maximization. This
company was established to employ members of the public both directly and
indirectly. By indirect employment the research means the staff of the company
whereas by indirect the research means distributor and other dependents on the
service of the company

STAEMENT OF PROBLEM

(1)     Inventory valuation is not
efficiently and effectively practiced in the firm. 

There is no adequate orientation to inventory valuation.

There is no consisted use of one system of inventory valuation.

Stock taking is done at will instead of periodically, quarterly or
yearly.

When stock taking occurs there is no measure for error control.

1.3     OBJECTIVES/ PURPOSE OF STUDY

To determine the extent to which Tea-Time bread industry has incorporated
inventory valuation. 

To find out the extent the valuation method has helped in a ring at good
management decision. 

To what way does Tea-Time Bread industry helped to reduce the
unemployment problem within our nation, Nigeria.

To determine whether or not practice of the valuation system is of
benefit to the organization

To determine whether or not practice of the valuation system is of
benefit to the organization.

1.4     SIGNIFICANCE OF THE STUDY

The business environment is becoming very dynamic and competition for
business organization survive  in a
rapidly changing environment management must keep abreast of the proper
direction in order to arrive at this management requires adequate and timely
ideas or information that would enable plan for the attainment of pre –
determined objectives. This study will be of value of management, employees and
owners of business organizations because of its reevaluation on.

The need to consider immentory valuation of part of the role in order to
build up the organization.

How to improve the valuation method by ensuring that the company
practices the valuation method efficiency and consistency.

Having this at the back of my mind, this study therefore will bring to
the knowledge of our management (Tea – Time bread industry) Enugu the numerous solutions to their
problems being encountered by stock or inventory management. The study will
also help to produce reliable costing information as regards to the records of
materials issued.

If production and delivery of goods were instance Laneous, there would be
no need for inventory of stock expect as a hedge against price changes.
Therefore inventory must be maintained so that customers may be serviced
immediately or at least guidely enough so that the customer does not turn to other
sources of supply.

Finally, production operation cannot flow smoothly without having
inventories of direct materials work – in- progress, finished goods and
supplies.

 

1.5     RESEARCH QUESTIONS

To what extent has the tea – time bread industry incorporated inventory
valuation in their production?

To what extent has valuation method contributed in taking good management
decision?

What are the benefits of inventory valuation to a bread manufacturing
industry like tea time bread?

To what extent has the tea – time bread industry helped to reduce the
unemployment problem in Nigeria?

DIRECT MATERIALS:
The raw materials that become an integral part of the finished product and are
significant enough to warrant tracing them from raw material to finished goods.

1.6     SCOPE TO STUDY

          This research work
concerned the inventory valuation as an aid to manufacturing company reference
to tea-time bread industry limited. However, as a result to the finance and
time constraint the research from her proper investigation, find it difficult.

          Actually, the research
only studied the tea – time bread industry limited which formed her research
unit. Furthermore, the researcher concentrated on the study mainly on
production department and the administration department question which will be
of help for a meaningful research work. Below are some of the designed
questions.

Does the system of inventory valuation in your organization receive
adequate attention as to permit effective efficient practice?

Do you opinion that there is adequate orientation to inventory valuation

Is there any designed period of inventory valuation in your organization?

At the time of inventory valuation in practice in your organization (if
not all) is there any measure designed for error control.

DEFINITION OF TERMS

RAW MATERIAL: This is the material or component used in price or sum of
the applicable expenditure and charges directly incurred in bringing articles
to us existing location.

FINISHED GOODS: these
units of goods that are completed and awaited for sales.

WORK – IN – PROGRESS:
This is partly finished goods that can be conveniently classified in this
category.

ORDER: To
request for something to bring made in return for payment.

GOOD RECEIVED NOTE:
This shows the date the supplies name, purchase order, quality and description
of the goods, their condition on arrival and details of returnable packing
materials and its signed by the checker.

CREDIT: A
book – keeping entry recording entry the reduction or limitation of an asset or
an expense.

DEBIT: A
book – keeping entry recording the income of or addition to an asset or an
expense.

BIN – CARD:
This is the card used by store keeper to record the movement of the stock. It
shows the description code number, maximum number, minimum number, re – order
level and quality and balance of stock in hand.

VENDOR: A
vendor is a supplier or seller of goods to the company.

MANAGEMENT: Is
the controller and organization of business.

NET REALIABLE VALUE: This
is the estimate or proceeds from sales less all additional costs incurred to
the point of completion marketing, selling and distribution of an item of
stock.

REPLACEMENT VALUE:
This is the case of stock raw materials and purchased part and what it would
cost to purchase similar qualities at the market price ruling on the date of
the balance sheet.

MOVE TIME: The
time taken in transporting the goods to the rent processing location.

UCUE TIME: The
amount the time job spends awaiting to be worked on.

LEAD TIME: The time required after placing or order or adopting a plan of
operation or production before materials and facilities can be acquired and
made ready and actual production initiated.

SET UP TIME: Preparing to run a job in a machine.

MARGIN OF SAFETY: The excess of sale over the break – even sales volume
expressed as naira or in quality (unit or as a ratio).

PERIODIC INEVNTORT SYSTEM: A
system of accounting for merchandise in which inventory at the balance sheet
date is determined by counting and pricing the goods on hand.

PERPETUAL INVENTORY SYSTEM: A
system for merchandise that provides continuous records showing the quality and
cost of all goods on hand.

INVENTORIABLE: Assets that cannot be
immediately assigned to inventory.