3 ) Briefly and explain each of the following in the context of material control

a) Continuous stock taking

- Is a system of physically checking the stocks in the stores on a frequent
(Daily basis). Under this system, an independent personnel, who does not
work in the stores is engaged to physically count the stocks in the stores
everyday. However, not every stock item is counted rather a random
sample of the stocks are chosen prior to the counting session.

- The advantages of continuous stock – taking is to avoid disruption of

production as in periodic stock – take , the regular checks produce more
accurate stock figures , discrepancies , losses can be discovered much
faster and stock figures more readily available.

b) Perpetual Inventory System

- Is a method use in ensuring the amount of stock level of every item could
be attained at all times? Usually, this involves recording all receipts, issues
and running balances for each item of the stock on the record card. This
system enables management to ascertain stock at any moment in time
without doing a physical stocktaking.

c) ABC inventory analysis

- Stocks are analyzed or arranged by categories, according to the value. All

items in stock are listed in order of descending value that consist
A – Items of considerable value
B - Items of medium value
C - Items of low value

High value or A items would come under very strict control. Low value or
C items would be under visual or physical control and medium value or B
items require average control measures.
 4) Briefly explain the terms “Economic Order Quantity “(EOQ). What are
the assumptions made in applying EOQ model ?

- It is the size of the purchase order, which minimizes the combined annual cost
which consist of placing orders, holding stock and purchase price (assumed that
price per unit is constant over a wide range). It can be calculated using the
following formula:

D = Total demand for material during a given period or the annual quantity used.
O = Cost of placing and receiving an order.
C = The annual cost of carrying one unit of material.

The EOQ model is based on the following assumptions:

a. demand is constant
b. Carrying and ordering cost are constant
c. Unit price is constant
d. Quick delivery
Replenishment is made instantaneously for example the whole batch is delivered at once