Definition of Raw materials inventory

Raw materials inventory

The total cost of all component parts currently in stock that
have not yet been used in work-in-process or finished goods production.

ABC inventory classification

A method for dividing inventory into classifications,
either by transaction volume or cost. Typically, category A includes that 20% of
inventory involving 60% of all costs or transactions, while category B includes
the next 20% of inventory involving 20% of all costs or transactions, and category
C includes the remaining 60% of inventory involving 20% of all costs or
transactions.

Average-Cost Inventory Method

The inventory cost-flow assumption that assigns the average
cost of beginning inventory and inventory purchases during a period to cost of goods sold and
ending inventory.

Average inventory

The beginning inventory for a period, plus the amount at the end of
the period, divided by two. It is most commonly used in situations in which just
using the period-end inventory yields highly variable results, due to constant and
large changes in the inventory level.

Bill of materials

A listing of all the materials and quantities that go to make up a completed product.

bill of materials

a document that contains information about
the product materials components and their specifications
(including quality and quantities needed)

Bill of materials

An itemization of the parts and subassemblies required to create a
product, frequently including assumed scrap rates that will arise as part of the production
process.

Bill of materials (BOM)

A listing of all parts and subassemblies required to produce one
unit of a finished product, including the required number of units of each part
and subassembly.

Blanket inventory lien

A secured loan that gives the lender a lien against all the borrower's inventories.

Book inventory

The amount of money invested in inventory, as per a company’s
accounting records. It is comprised of the beginning inventory balance, plus the
cost of any receipts, less the cost of sold or scrapped inventory. It may be significantly
different from the actual on-hand inventory, if the two are not periodically
reconciled.

Breeder bill of materials

A bill of material that accounts for the generation and
cost implications of byproducts as a result of manufacturing the parent item.

Crawling peg

An automatic system for revising the exchange rate. It involves establishing a par value around
which the rate can vary up to a given percent. The par value is revised regularly according to a formula
determined by the authorities.

Days' sales in inventory ratio

The average number of days' worth of sales that is held in inventory.

Direct materials cost

The cost of all materials used in a cost object, such as finished goods.

Direct materials mix variance

The variance between the budgeted and actual mixes of
direct materials costs, both using the actual total quantity used. This variance isolates
the unit cost of each item, excluding all other variables.

Distribution inventory

inventory intended for shipment to customers, usually
comprised of finished goods and service items.

dollar days (of inventory)

a measurement of the value of inventory for the time that inventory is held

Ending inventory

The dollar value or unit total of goods on hand at the end of an
accounting period.

Finished goods inventory

Goods that have been completed by the manufacturing
process, or purchased in a complete form, but which have not yet been sold to
customers.

Finished goods inventory

Completed inventory items ready for shipment to
customers.

First-In, First-Out (FIFO) Inventory Method

The inventory cost-flow assumption that
assigns the earliest inventory acquisition costs to cost of goods sold. The most recent inventory
acquisition costs are assumed to remain in ending inventory.

Fluctuation inventory

Excess inventory kept on hand to provide a buffer against
forecasting errors.

Hedge inventory

Excess inventories kept on hand as a buffer against contingent
events.

In-transit inventory

inventory currently situated between its shipment and delivery
locations.

Inactive inventory

Parts with no recent prior or forecasted usage.

Inventory

For companies: raw materials, items available for sale or in the process of being made ready for
sale. They can be individually valued by several different means, including cost or current market value, and
collectively by FIFO, LIFO or other techniques. The lower value of alternatives is usually used to preclude
overstating earnings and assets.
For security firms: securities bought and held by a broker or dealer for resale.

Inventory

Goods bought or manufactured for resale but as yet unsold, comprising raw materials, work-in-progress and finished goods.

Inventory

The cost of the goods that a company has available for resale.

Inventory

Goods that a firm stores in anticipation of its later sale or use as an input.

Inventory

The cost of unsold goods that are held for sale in the ordinary course of business or
that will be used or consumed in the production of goods to be sold.

Inventory

Those items included categorized as either raw materials, work-inprocess,
or finished goods, and involved in either the creation of products or service
supplies for customers.

Inventory adjustment

A transaction used to adjust the book balance of an inventory
record to the amount actually on hand.

Inventory Days

The number of days it would take to sell the ending balance in inventory at the
average rate of cost of goods sold per day. Calculated by dividing inventory by cost of goods sold
per day, which is cost of goods sold divided by 365.

Inventory diversion

The redirection of parts or finished goods away from their intended
goal.

Inventory issue

A transaction used to record the reduction in inventory from a location,
because of its release for processing or transfer to another location.

Inventory loan

A secured short-term loan to purchase inventory. The three basic forms are a blanket
inventory lien, a trust receipt, and field warehousing financing.

Inventory receipt

The arrival of an inventory delivery from a supplier or other
company location.

Inventory returns

inventory returned from a customer for any reason. This receipt
is handled differently from a standard inventory receipt, typically into an inspection
area, from which it may be returned to stock, reworked, or scrapped.

inventory shrinkage

A term describing the loss of products from inventory
due to shoplifting by customers, employee theft, damaged and
spoiled products that are thrown away, and errors in recording the purchase
and sale of products. A business should make a physical count and
inspection of its inventory to determine this loss.

Inventory Shrinkage

A shortfall between inventory based on actual physical counts and inventory
based on book records. This shortfall may be due to such factors as theft, breakage, loss, or
poor recordkeeping.

Inventory turnover

The ratio of annual sales to average inventory which measures the speed that inventory
is produced and sold. Low turnover is an unhealthy sign, indicating excess stocks and/or poor sales.

INVENTORY TURNOVER

The number of times a company sold out and replaced its average stock of goods in a year. The formula is:
(Cost of goods sold) / (Average inventory (beginning inventory + ending)/2 )

Inventory turnover

The number of times per year that an entire inventory or a
subset thereof is used.

Inventory Turnover

Ratio of annual sales to inventory, which shows how many times the inventory of a firm is sold and replaced during an accounting period.

inventory turnover ratio

The cost-of-goods-sold expense for a given
period (usually one year) divided by the cost of inventories. The ratio
depends on how long products are held in stock on average before they
are sold. Managers should closely monitor this ratio.

Inventory Turnover Ratio

Provides a measure of how often a company's inventory is sold or
"turned over" during a period. It is calculated by dividing the sales
figure for the period by the book value of the inventory at the end of
the period.

inventory write-down

Refers to making an entry, usually at the close of a
period, to decrease the cost value of the inventories asset account in
order to recognize the lost value of products that cannot be sold at their
normal markups or will be sold below cost. A business compares the
recorded cost of products held in inventory against the sales value of the
products. Based on the lower-of-cost-or-market rule, an entry is made to
record the inventory write-down as an expense.

Just-in-time inventory systems

Systems that schedule materials/inventory to arrive exactly as they are
needed in the production process.

Last-In, First-Out (LIFO) Inventory Method

The inventory cost-flow assumption that assigns the most recent inventory acquisition costs to cost of goods sold. The earliest inventory
acquisition costs are assumed to remain in ending inventory.

Materials price variance

The difference between the actual and budgeted cost to
acquire materials, multiplied by the total number of units purchased.

Materials quantity variance

The difference between the actual and budgeted quantities
of material used in the production process, multiplied by the standard cost per
unit.

Materials requirement planning

Computer-based systems that plan backward from the production schedule
to make purchases in order to manage inventory levels.

materials requirements planning (MRP)

a computerbased information system that simulates the ordering and
scheduling of demand-dependent inventories; a simulation
of the parts fabrication and subassembly activities that are
required, in an appropriate time sequence, to meet a production
master schedule

Materials requisition

A document listing the quantities of specific parts to be withdrawn
from inventory.

Maximum inventory

An inventory item’s budgeted maximum inventory level,
comprising its preset safety stock level and planned lot size.

MERCHANDISE INVENTORY

The value of the products that a retailing or wholesaling company intends to resell for a profit.
In a manufacturing business, inventories would include finished goods, goods in process, raw materials, and parts and components that will go into the end product.

Minimum inventory

An inventory item’s budgeted minimum inventory level.

Moving average inventory method

An inventory costing methodology that calls for the re-calculation of the average cost of all parts in stock after every purchase.
Therefore, the moving average is the cost of all units subsequent to the latest purchase,
divided by their total cost.

Negotiable order of withdrawal (NOW)

Demand deposits that pay interest.

Net inventory

The current inventory balance, less allocated or reserved items.

Obsolete inventory

Parts not used in any current end product.

Periodic inventory

A physical inventory count taken on a repetitive basis.

Periodic inventory system

An inventory system in which the balance in the inventory account is adjusted for the units sold only at the end of the period.

Perpetual inventory

A system that continually tracks all additions to and deletions
from inventory, resulting in more accurate inventory records and a running total for
the cost of goods sold in each period.

Perpetual inventory

A manual or automated inventory tracking system in which
a new inventory balance is computed continuously whenever new transactions
occur.

Perpetual inventory system

An inventory system in which the balance in the inventory account is adjusted for the units sold each time a sale is made.

Physical inventory

A manual count of the on-hand inventory.

Raw material

Base-level items used by the manufacturing process to create either
subassemblies or finished goods.

Raw material supply agreement

As used in connection with project financing, an agreement to furnish a
specified amount per period of a specified raw material.

Raw materials

Unprocessed goods bought for manufacture, part of inventory.

Reconciling inventory

The process of comparing book to actual inventory balances,
and adjusting for the difference in the book records.

Seasonal inventory

Very high inventory levels built up in anticipation of large
seasonal sales.

Special drawing rights (SDR)

A form of international reserve assets, created by the IMF in 1967, whose
value is based on a portfolio of widely used currencies.

Summarized bill of materials

A bill of materials format showing the grand total
usage requirement for each component of a finished product.

Surplus inventory

Parts for which the on-hand quantity exceeds forecasted
requirements.

systematic withdrawal plan

Plans offered by mutual fund companies that allow unitholders to receive payment from their investment at regular intervals.

vendor-managed inventory

a streamlined system of inventory
acquisition and management by which a supplier can
be empowered to monitor EDI inventory levels and provide
its customer company a proposed e-order and subsequent
shipment after electronic acceptance

Vendor-managed inventory

The direct management and ownership of selected
on-site inventory by suppliers.

Withdrawal

The release of items from storage.

Withdrawal plan

The ability to establish automatic periodic mutual fund redemptions and have proceeds
mailed directly to the investor.

Work-in-process inventory

inventory that has been partially converted through the
production process, but for which additional work must be completed before it can
be recorded as finished goods inventory.

Financial year

The accounting period adopted by a business for the production of its financial statements.
Finished goods inventory that is ready for sale, either having been purchased as such or the result of a conversion from raw materials through a manufacturing process.

material requisition form

a source document that indicates
the types and quantities of material to be placed into production
or used in performing a service; it causes materials
and its cost to be released from the raw Material inventory
warehouse and sent to Work in Process inventory

two-bin system

an inventory ordering system in which two
containers (or stacks) of raw materials or parts are available
for use; when one container is depleted, the removal
of materials from the second container begins and a purchase
order is placed to refill the first container

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