Kbd Sugars

INVENTORY MANAGEMENT KBD SUGARS & DISTILLERIES LTD

Introduction to inventory management

Financial management is the managerial activity which is concern with the planning

and controlling of the firm’s financial resources. Though it was a branch of economics till

1890 as a separate activity or discipline. It is of recent origin still it as no unique body of

knowledge of its own. And draws heavily on economics for its theoretical concepts even

today.

The subject of financial management is of immense to both academician and

practicing managers. It is of great interest to academicians the subject is still developing and

there are still certain areas when controversies exist for which unanimous solutions have been

reached as yet.

In financial management the working capital management plays a major role. The

working capital management will be effectively managed by inventory management. In my

present chapter the inventory management will be discussed in these topics, importance of

inventory management, nature of inventories, need to hold inventories, cost of holding

inventories, other characteristics of inventory situations, types of inventory, economic order

quantity, techniques of inventory management.

Meaning of inventory managementInventory management means safeguarding the company property in the form of

inventories and maintaining it at the optimum level, considering the operating requirements

and financial resources of the business. Inventory management emphasizes control over

purchases, storage, consumption of materials and determining the optimum level for each

item of investments.

SRI RAMA KRISHNA PG COLLEGE NANDYAL


Importance of Inventory Management

Inventory management is concerned with keeping enough products on hand to avoid

running out while at the same time maintaining a small enough inventory balance to allow for

a reasonable return on investment. Proper inventory management is important to the

financial health of the corporation; being out of stock forces customers turn to competitors or

results in a loss of sales. Excessive level of inventory however, results in large carrying

costs, including the cost of capital tied up in inventory warehouse fees, insurance etc.

A major problem with managing inventory is that the demand for a corporation’s

product is to a degree uncertain. The supply of the raw materials used in its production

process is also somewhat uncertain. In addition the corporations own production contains

some degree of uncertainty due to possible equipment breakdowns and labor difficulties.

Because of these possibilities, inventory acts as a shock absorber between product

demand and product supply. If product demand is greater than expected, inventory can be

depleted with out losing sales until production can be stepped up enough to select the

unexpected demand.

However inventory is difficult to manage because it crosses so many lines of

responsibility. The purchasing manager is responsible for supplies of raw material and would

like to avoid shortages and to purchases in bulk order take advantages of quantity discounts.

The production manager is responsible for uninterrupted production and wants to

have enough raw materials and work in process, inventory on hand to avoid disruption in the

production process. The marketing manager is responsible for selling the product and wants

to minimize the chances of running out of inventory. The financial manager is concerned

about achieving an appropriate overall rate of return. Funds invested in an inventory are idle

and do not earn a return.



Nature of Inventories

Inventories are stock of the product a company is manufacturing for sale and

components that make up the product. The various forms in which inventories that exist in

manufacturing company are

Raw materials

Work-in-process

Finished goods

Raw materials

These are those basic inputs that are converted into finished product through the

manufacturing process. Raw materials inventories are those units which have been purchased

and stored for future production.

Work-in-process

These inventories are semi-manufacture products. They represent products that need

more work before they became finished for sale.

Finished goods

These inventories are those completely manufactured products which are ready for sale.

Stocks of raw materials and work-in-process facilitate production while stock of finished

goods is required for smooth marketing operations. Thus, inventories serve as link between

the production and consumption of goods.

Need to hold inventories

Maintaining of inventories involves trying up the companies and incurrence of storage

and handling cost. There are three general motives for holding inventories.



Transaction motive

It emphasizes the need to maintaining inventories to facilitate smooth production and

sales operation.

Precautionary motive

It necessitates the holding of inventories to guard against risk of unpredictable

changes in demand and supply force and other factors.

Speculative inventories

It influences the decision to increase or reduce inventory level to take advantage of

price fluctuations.

The firm should always avoid a situation of over investment or under investment in

inventories.

The major dangers of over investment in inventories are

i. Unnecessary tie up of the funds and loss of profits.

ii. Excessive carrying cost.

iii. The risk of liquidity.

The consequences of under investment in inventories are

i. Production hold-ups

ii. Failure to meet delivery commitments. Inadequate raw materials.

iii. Work-in-process will result in frequent in production interrupts.

An efficient inventory management should



Ensure a continuous supply of raw materials to facilitate uninterrupted production.

Maintain sufficient supply of raw materials in periods of short supply and

anticipate price changes.

Maintain sufficient finished goods inventory for smooth sales operation and efficient

customer service.

Minimize the transportation cost on time.

Control investment in inventories and keep it at an optimum level

Cost of holding inventories

The determination of inventory cost is essentially an income measurement problem, a

means where by there is rational orderly, systematic interpretation of the effect on the

economic progress of the company of expenditures involved acquiring goods or in

maintaining and operating productive facilities. Ability to quantify and develop rigorous

models of most managerial problems is dependent on the determination behavior of relevant

costs. The practical application of such models is also dependent on ability to obtain the cost

data. Relevant inventory costs which change with level of inventory are listed below.

Ordering costs

Every order is placed for stock replenishment, certain cost are involved. The ordering

cost may vary, dependent upon type item.

This cost of ordering includes

Paper work cost, typing and dispatching order.

Follow-up costs the follow-up required ensure timely supplies include the travel cost

for purchases follow-up, telephone telex and postal bills.

Cost involved in receiving the order inception, checking and handling to the stores.

Any set up cost of machines if charged by supplier, either directly indicated in

quotations or assessed thought quotations for various quantities.

The salaries and wages to the purchase department are relevant for consideration if

the purchasing function is carried out at the same level with existing staff.



There are certain costs that remain the same regardless of the size of the lot purchased or

requisitioned. This would be retailer ordering from the distributor, from the distributor

ordering from a factory warehouse, for the factory warehouse ordering a new production

run from the factory, and for the factory ordering raw materials from vendors. These

kinds’ of costs are called preparation or set up costs.

If we are ordering to replenish supplies at one stock point from another stock point,

our interest is in the incremental clerical costs of preparing orders, following these orders.

Expediting them when necessary, etc, a large segment of the total cost of the ordering

function is fixed, regardless of the number orders issued. Even then it may be difficult

determined satisfactorily the incremental cost, which results from one more order.

Quantity discounts and handling and transport cost are other factors, which vary lot sizes.

Preparation cost are the incremental costs of planning production, writing production orders,

setting machines and controlling the flow orders through the factory. Material handling cost

in the plant have an effect on production lot sizes in much the same way that freight costs

may effect purchase lot sizes.

Besides the preparation costs of production, there are some other production costs,

which have a direct bearing on inventory models, however. These are over time

premiums and the incremental cost of changing production levels, such as hiring, training,

and separation costs.

Carrying costs

Carrying costs constitutes all the costs of holding items in inventory for a given period of

time. They are expressed either in rupees per period or as percentage of the inventory value

per period.

Components of these costs include the following

Storage and handling cost.

Obsolescence and deterioration costs



Insurance

Taxes

The cost of the funds invested in inventories

Storage and handling costs include the cost of warehouse space.

Obsolescence costs represent the decline in inventory value caused by style changes

that make the existing product less salcable.

Deterioration costs represent the decline in value caused by changes in the physical

quality of the inventory such as spoilage and breakage.

Another element of carrying cost is the cost of insuring the inventory against losses

due to theft, fire and natural disaster. In addition, a company must pay any personal property

taxes required by local and state government on the value of its inventories.

Like ordering costs, inventory-carrying costs contain both fixed and variable

components. Most carrying costs vary with inventory level, but a certain portion of them-

such as warehouse rent and depreciation on inventory handling equipment- are relatively

fixed over the short run, inventory model such as EOQ model treat the entire carrying cost as

variable.

Stock out costs

Stocks out costs are incurred when ever a business is unable to fill orders because the

demand for an item is greater than the amount currently available in inventory. When a stock

out in raw materials occur, for example, stock out costs include the expenses of placing

special orders (back ordering) and delays. A stock out in work in progress inventory results

in additional costs of rescheduling and speeding production with in the plant, and it also may

result in reduce production costs if work stoppages occur. Final, a stock out in finished goods

inventory may result in the immediate loss of profits of customers decide to purchase the

product from the competitor and in potential long-term losses if customers decide to order

from other companies in the future.



Other characteristics of inventory situations

Besides the various types of costs involved, there are other characteristics of the

situation that vary among types of inventory and must be captured if the decision model is to

be an accurate representation of the physical circumstances.

Lead times

Obtaining inventory usually requires a lag from the initiation of the process until the

inventory starts to arrive. This lead-time may be a few minutes or it may be many months,

and depends in part on whether the firm is producing goods for its inventory or is ordering

these goods from another firm. To produce goods for its own use, the firm must schedule, set

up and adjust manufacturing equipment.

Sources and levels of risk

Uncertainties play a significant role in inventory situations. Uncertainties usually involve

lead times and demand times and demand levels, but situations where other variables are

uncertain also occur. Where are substantial uncertainties and where the costs of stock out are

important Strategies for addressing risk must be formulated?

Static versus dynamic problems

Inventory problems are usually divided into two types based on the characteristics of

the goods involved. In static inventory problems, the goods have one-period life; there can

be carrying over of goods from one period to the next. Inventory situations where decisions

involve the number of news papers to print, the number of greeting cards to purchase or the

number of calendars to produce are static inventory problems. In dynamic inventory

problems, the goods have value beyond the initial period; they do not lose their value

completely over time.



Replenishment rate

Once goods start to be received from a vendor or from the firms own production

processes, there are differences among goods in the rate at which they are received. Small

orders from vendors are likely to by receive all at once. For example, assume that a firm has

placed in order for 10 cases of paper towels. For such a small order the rate of replenishment

is infinite; the firm’s inventories well go up 10 cases in a very short time as the goods are

quickly unloaded.

For large order from vendors, or for inventory produced with in the firm, the

replenishment rate may be slower.

Types of inventory

Inventories can be classified into five basic types on the basis of their production.

These various types of inventories cannot be identified and segregated within the

organization. These five types are

1. Management inventory

They are needed because of the time required to move stocks from one place to

another place.

2. Lot size Inventories

These are as a result of buying materials in quantities larger than the immediate

requirement, with a view to minimizing cost of transportation, buying, receipt and handling

and to obtaining quantity discount.

3. Fluctuation Inventories

These are carried to ensure ready suppliers to consumer even when these are irregular and

unpredictable fluctuations in their demand

.



4. Anticipation inventories

These are usually maintained to meet a predictable but changing pattern of future

demand.

5. Cycle Inventories

These result from managements attempt to minimize the total cost of carrying and

ordering inventory. They arise from ordering in batches or lots, rather from needed basis.

Inventories can be further classified into production inventories maintenance repair

and operation (MRO) inventories, in-process inventories and finished goods inventories.

Production inventory consists of raw materials parts and components which are used

in the production process forming parts of the final product.

Maintenance, repair and operation supplies which are used in the production of goods

or services but do not become part of the product.

In-process inventories are semi-finished materials, parts and assemblies found at

various stages in the production operation.

Finished goods inventory consists of completed products ready for sale.



2.1 INDUSTRIAL PROFILE

Sugarcane is one of the important crop for the INDIAN FARMER. Sugar &jaggery

are the main products that we get from Sugarcane, other products are baggage for industrial

use like Molasses for Distillery, Filter Cake, Mud,Organic Manure & green leaves with tops

for cattle feed are also available as by products, because of its multi uses sugarcane has

played crucial feed role in Indian economy with Rs. 20,000 Cores TURNOVER & WITH

450 SUGAR MILLS PROVIDING assistance to 45 million sugarcane farmer and 2 million

workmen directly and indirectly.

In A.P sugar industry is an important Agro-based industry, occupying the second

position next to textile industry. The annual cultivated area is about 1.99 lakh hectares with a

yield of 149.45 lacks of tons during 96-97. At present, there are 36 sugar factories in the state

and 50% of them are in co-operative sector. The co-operative sugar units in the states have

been suffering due to lack of adequate cane irrigation facilities, working capital, by-product

utilization, excessive employment etc.,….

In AP sugar industry is an important agro based industry occupying the

SECOND position next to textile industry. The annual cultivated area is about 1.99 LAKHS

hectares with a yield of 149.45 LAKHS of tones during 1996-1997. At present there are 36

sugar factories in the state and 50% of them are in co-operative sector. Actually the work

sugar derived from a Sanskrit word “SHAKRA”.

India was the world’s largest producer of sugar cane occupies a very pride

place in the world. In India, the cultivation of sugar cane is 10000 miles tons. The average

yield, being 56 tons per acre of total land is occupied by sugar cane cultivation. Sugarcane is

grown in almost all part of India, expect in colder regions and extreme north Jammu &

Kashmir, HimachalPradesh.



2.2 COMPANY PROFILE

INTRODUTION

KARNATAKA BEWARIES DISTILLERIES SUGARS AND INDUSTRIES

LIMITED PROFILE

The irrigation in chittoor district mostly depends on open wells. Recharge of water

in the wells depends in ground water level and rainfall. However, rainfall depends in

monsoon which is uncertain. The soils in district are almost suitable fir sugarcane cultivation.

The formers also having good knowledge of growing sugarcane. In good olden days, total

quantity of sugarcane produced in the district was converted as jaggery by ganugas (bullock

crushers) and power crushers. The jaggery making was very difficult to the small farmers due

to lack of crushers and unfavorable prices. The big farmers also faced difficulty to crush the

cane for long period.

The jaggery made in the district was brought to the chittoor and pakala which are

the market places with railway transpiration. There was lit of exploitation of farmers by the

jaggery mundi owners by advancing the money with high interest rates, commission and also

not properly weightment. The price fluctuation created by the traders was also a reason for

poor realization, but there was no other choice to the formers.

NAME : K.B.D SUGARS AND DISTILLERIES

LOCATION AND ADDRESS : MUDIPAPANAPALLI (VILLAGE)

SUGALIMITTA (POST)

PUNGANUR – 517 247

CHITTOOR (DT), A.P



2.3 BRIEF HISTORY ABOUT THE COMPANY

The company was originally incorporated on 16th day of October, 1984 under the

name of SREE TELUGU SUGARS LIMITED. Subsequently the name of the company was

changed to SREE VANNI SUGARS AND INDUSTRES LIMITED on the 5 th day of April,

1990. Again subsequently the name of the company was changed to KBD SUGARS &

DISTILLERIES LTD on the 1st march, 2005.

The company was initially promoted by Sri T. Surya Chandra rao, managing

director and Sri S. Gokul; executive directors commence its commercial production from 01st

July, 1992.

In the initial years if performance of the company was much below the break even

levels. Due to poor performance, the company accumulated substantial cash loses and also

defaulted in meeting the terms loan comities AIFIs. In these circumstances, the promoters

have inducted Sri D.K. Audikesavulu as a co-promoter in order to facilitate the company to

meet the cost overrun of the project and also provide for the short fall in the margins for

working capital. Sri Gokul has since come out of the board and left the company.



2.4 MAIN OBJECTS OF THE COMPANY

Sellers, Distributors, Super Stockists and Traders of Sugars and its derivatives,

molasses biases and all materials and substances arising as By products and waste

products as manufacture of sugar.

To carry in the business as manufacturers, producers, brewers, Blenders, dealer's

distillers, stock lists and traders of rectified spirit, ethyl. Alcohol, gasohol, acetic acid,

acetone anhydride, vinyl acetate, polymers, plastics, polyvinyl chloride, liquors and

all products made there from.

To carry on the business as manufacturers, producers, packers, Dealers, stock lists

and traders of furfural, bulk drugs, pharmaceutical and medical preparations,

made out of By-products of sugar or their derivatives.

To carry in the business as manufacturers, dealers, distributors, stock lists and

traders of biogases pulp, paper pulp and pulp made out agricultural Residues or

other fibrous materials, paper, newsprint, paper boards, mill boards, stew boards,

cites paper of all kinds, paper bags, febrile boxescartons, corrugate containers,

wrapping and packing materials.

To carry on the business as planters, growers, cultivators, farmers and producers of

sugarcane, sugar beet.

To generate electrical power by conventional, non- conventional methods, including

coal, gas Lignite. naphtha oil , bio-mass, biogases, waste thermal solar, hydel, geo-

hyderl, minor tidal waves any to promote, own acquire, construct, establish, maintain,

improve, manage operate, alter carry on, control. Take in hire / lease, power plants,

cogeneration plants, energy conversion projects power houses, transmissions and

distribution system for generation, transmission and supply of electrical energy to the

state electricity board, state govt., appropriate authorities, agricultural, household



industrial, commercial, and any other consumer for industrial purpose in Indian and

else where specified by the state / central govt. local authority in state electricity

board and any other competent authorities by entering into necessary agreements.

PRESENT BOARD OF DIRECTORS

NAME DESIGNATION

SRI.D.K.AUDIKESAVULU CHAIRMAN & MANAGING DIRECTOR

SRI.D.A.SRINIVAS DIRECTOR

SRI.L.SURYA CHANDRA ROA DIRECTOR

SRI.N.V.VARADA RAJULU DIRECTOR

SRI.RAMACHANDRAIAH DIRECTOR

M.G.G.NAIDU DIRECTOR

SRI.P.L.SANJEEVA REDDYDIRECTOR

(Nominee for IREDA)



2.5 PRODUCTION PROCESS

White plantation sugar manufacturing from sugarcane is a continuous process

involving several stages viz., clarification, concentrating, and crystallization and oaring.

In order to extract juice from cane, the practice is to crush the cane in a random of

a 3-roller mill. In order to extract as much juices possible, water is added to the crushed mass,

which further dilutes whatever left over juice. This extracted juice is termed as “mixed juice”.

This will be in the both diluted and undiluted form. This mixed juice is weighted in a

weighing scale and sent for processing.

The weighted mixed juice is heated in “juice heaters” in 2stages. In the first stage

and heating the juice is heated from about 35c-70c. This heated juice is mixed with milk of

lime and sulphur-dioxide, in a vessel, which are called “clarifying agents”.

In the second stage of heating which is heated from about 70c-103c.

These clarifying agents combined with various impurities to form ‘precipitation’

and the precipitations are allowed to settle down leaving ‘clear juice’. The juice retention

time is about 3hours. The clear juice is further boiled in a set of tubular vessels known as

‘evaporators’.

This concentrated juice is now called syrup which contains 60% solids, by weight.

It contains several coloring matters, which have to be eliminated by neutralized before the

final stage of concentration. For this process the syrup is ‘sulfated’ again with SO2 gas. This

clarification process is known as ‘double sulphitation’.

This sulfate syrup is sent to ‘pan floor’ where the final stages of boiling is the

first stage where syrup other high purity materials are boiled to build up what is called as

‘massecuite’ i.e., mixture of sugar crystals and molasses. Massecuite is subjected to cooling



in crystallizes from where it is taken ‘centrifuging’ I.e., method used to separate sugar

crystals are nothing but pure ‘source’ and the dried graded and bagged. The molasses

obtained are taken back for the subsequent stages of boiling.

In the second stage the massecuite (that is centrifuged) is cured again continuous

in centrifugal machines which leads to sugar.

In the third stage Massecuite is built-up with low purity materials and boiled

heavily and then this massecuite is cooled much longer when compared to the other 2

massecuites in order to allow maximum exhaustion of source content.

The sugar obtained is mixed with water and ‘Mango’ is prepared. The molasses

obtained in final molasses from which no further exhaustion of sugar is possible is out for

storage.

2.6 SALES

The government of India, commission of Andhra Pradesh, controls sugar sales of

KBD sugars and Distilleries Limited. So there is no as such projected sales target.

2.7 MANPOWER

The KBD sugars unit has workers strength of 450 and staff of about 90.the unit

also has few Housing Colonies accommodating few of his workers.

2.8 POLLUTION CONTROL

The company has installed the required equipment to prevent water and air

pollution as per the standards laid by the AP pollution Control Board. Necessary steps have

also been taken such as plantation of trees, sapling and seedlings in and around factory area

and in the colony, to protect the environment ecology.

2.9 RESEARCH AND DEVELOPMENT

The company has been attempting cultivation of various varieties of sugarcane in

the notified area to identify the variety, which is more suitable to the existing agro-climatic



conditions, continuous effort are also being made in this direction to grow sugarcane variety

which gives higher sugarcane yield and higher recovery in the notified area.

2.10 DEPARTMENTATION

1. WARE HOUSE –

In the department the field product is brought and prepared for dispatch.

2. ENGINEERING DEPARTMENT-

In this department spare part are made and old parts are repaired.

3. CANING DEPARTMENTS-

In this department account is maintained for the amount of raw material brought in by the framers to the factory to the factory premises.

4.Research and the Development-

The functions of this department are inspection and testing. It ensures quality from input finished product.

5. PLANNING DEPARTMENT-

Planning department is linked with marketing and technical department. This department plans all the specifications, finalize the rates and prepare purchase order as and when required.

6. MARKETING DEPARTMENT-

This department is the backbone of the entire company. It looks after the marketing aspects of the company.

7. ACCOUNTS AND FINANCE DEPARTMENT -

This department looks after the company’s financial aspects and makes the wages and salaries of staff and workers.



8. HUMAN RESOURCES DEVELOPMENT-

This department is reasonable for formulating, implementing, administering, monitoring and reviewing periodically the personal and HRD policies and practices considered conductive to the overall development of the employees as well as the organization.

ORGANISATION CHART OF

KBD SUGARS AND DISTILLERIES LIMITED

CEO

VP

MARK

ETING

DEPAR

T MENT

VP

R&D

DEPART

MENT

VP

FINANCIAL

DEPART

MENT

VP

MIS

DEPART

MENT

VP

ACCOUNTS

DEPART

MENT

VP

ENGIN

EERING

DEPART

MENT

VP

HR

DEPART

MENT



3 REVIEW OF LITERATURE

Inventory Management is concerned with keeping enough product on hand to avoid

running out while at the same time maintaining a small enough inventory balance to allow for

a reasonable return on investment. Proper inventory management is important to the

financial health of the corporation. Excessive level of inventory, results in large inventory

carrying cost, including the cost of capital tied up in inventory warehouse fees, insurance etc.

Inventory is needed for the definite consumption demand of materials, and to take

care of the uncertainty involved in the usage or availability of the materials. Some times

other authors described as the “decoupling function” of the inventory of materials is

maintained at the different stages of production.

The inventory taking care of the normal consumption requirements i.e., “depending

upon the average consumption rates and average lead times for procurement/manufacture of

the material, inventories are kept at the appropriate times” is called the “normal inventory”

and the inventory taking care of “a production process, however continuous it maybe, is

bound to have some interruptions; it may also have imbalances in the consumption and

production rates of the materials at different stages.

These interruptions and imbalances make it necessary to keep stocks of inventory

between the different stages of the operations” the aspect of this uncertainty is called the

“safety stock” or “buffer stock” of inventory



Techniques of inventory management

1) ABC analyses

The ABC method is an analytical method of stock control which aims at

concentrating efforts on those items where attention is needed most. It is based on the

premise that a small number of the items in inventory may typically represent the bulk money

value of the total materials used in production process. While a relatively large number of

items may represent a small portion of the money value of stores used and that small number

of items should be subject to the greatest degree of continuous control.

Under this system, the materials stocked may be classified into a number of categories

according to their importance i.e., their value and frequency of replenishment during a period.

The first category, we may call it the group of ‘A’ items, may consist of only a small

percentage of total items handled but its combined value may be a large portion of the total

stock value.

The second category, naming it as group of ‘B’ items, may be relatively less

important. In the third category consisting of ‘C’ items, all the remaining items of stock may

be included which are quite large in numberbut their value is not high.

Categories of ABC analysis

In ABC analysis the items are classified in three main categories based on their

respective consumption value.

1. Category ‘A’ items:



The items, which are most costly and valuable, are classified as ‘A’ nearly 10% of the

total number of items stored will account for 70% of total value of all items stocked.

2. Category ‘B’ items:

The items having average consumption value are classified as ‘B’ nearly20% of total

number of items will account for 20% of total value. Statistical sampling is general

useful to control them.

3. Category ‘C’ items:

The items having low consumption value are put in category “C” nearly 70% of total

number as items will account for 10% total value. Generally these items are slow and

non-moving items in the stores, which are frequently used for production process but

with more quality.

2) VED classification

This analysis is based on criticality of inventory, it is used to determine the criticality

of the item and its effect on production and other services .it is specially used for

classification of spare parts. If a part is vital, it is given V classification. if essential ,then it is

given E classification and if it is not essential the part is given D classification for V

items, a large stock of inventory is generally maintained ,these item have immediate effect

on production more attention paid for this items

3) ECONOMIC ORDER QUANTITY

The economic order quantity is that inventory level, which minimizes the total of

ordering cost and carrying costs.

It is the question, how much to order the quantity when inventory is replenished. If

the firm is buying raw materials, the question is to purchase the quantity of; each

replenishment and if it has to plan for production run, it is how much production to schedule.

It may be solved through EOQ.

COST OF HOLDING INVENTORIES

The determination of inventory costs is essentially an income measurement problem,

a means whereby there is a rational, orderly, systematic interpretation of the effect on the

economic progress of the company of expenditures involved in acquiring goods or in



maintaining and operating productive facilitates. Ability to quantify and develop rigors

models of most managerial problems is dependent on the determination of the behavior of

relevant costs. The practical application of such models is also dependent on ability to obtain

the cost data. Relevant inventory costs which change with the level of inventory are listed

below.

Ordering cost:

Every timer an order is placed for stock replenishment, certain costs are involved. The

ordering cost may vary, dependent upon the type of item. However, an estimate of ordering

cost can be obtained for a given range of items.

1. Paper work costs, typing and dispatching an order.

2. Follow –up costs-the follow-up required to ensure timely to ensure timely supplies

include the travel cost for purchase follow—up, telephone, telex and postal bills.

3. Cost involved in receiving the order inspection, checking and handling to the stores.

4. Any set up cost of machines if charged by the supplier, either directly indicated in

quotations or assessed through quotations for various quantities.

5. The salaries wages to the purchase department are relevant for consideration if the

purchasing function is carried out at the same decreases significantly, obviously a

proportional amount of personnel will be transferred to other departments.

Carrying Costs:

Carrying costs constitute all the costs of holing items in inventory for a given period

of time. They are expressed either in rupees per unit per period or as a percentage of the

inventory value per period. Components of this cost include the following.

1. Storage and Handling costs: It includes the cost of warehouse space.



2. Obsolescence and deterioration costs:”Obsolescence costs” represent the decline in

inventory value caused by technological or style changes that make the existing

product less salable. “Deterioration costs” represent the decline in value caused by

changes in the physical quality of the inventory, such as spoilage and breakage.

3. Insurance: The inventory against losses due to the theft, fire, and natural disaster.

4. Taxes: A company must pay any “personal property taxes and business taxes”

required by local and state governments on the value of its inventory.

5. The cost of funds invested in inventories: It is measured by the “required rate of

return” on these funds. Because inventory investments are likely to be of “average

risk” the overall weighted cost of capital should be used to measure the cost of these

funds.

6. Storage and Handling costs: It includes the cost of warehouse space.

7. Obsolescence and deterioration costs:”Obsolescence costs” represent the decline in

inventory value caused by technological or style changes that make the existing

product less salable. “Deterioration costs” represent the decline in value caused by

changes in the physical quality of the inventory, such as spoilage and breakage.

8. Insurance: The inventory against losses due to the theft, fire, and natural disaster.

9. Taxes: A company must pay any “personal property taxes and business taxes”

required by local and state governments on the value of its inventory.

10. The cost of funds invested in inventories: It is measured by the” required rate of

return” on these funds. Because inventory investments are likely to be of “average risk”

the overall weighted cost of capital should be used to measure the cost of these funds.

EOQ for an item is arrived on the following assumptions

1. Demand is continuous at a constant rate.

2. The process continues infinity.

3. No constraints are imposed on quantities ordered, storage capacity, budget etc.,

4. Replenishment is instantaneous.

5. All costs are time invariant.

6. Units are not available.



EOQ for an item is arrived by the following formula

EOQ=

Where

EOQ=economic order quantity

Co=cost of ordering an order

AD= annual consumption of an item

CH=cost of carrying one unit/year

4) HML classification

The high .and medium and low (HML) classification follows the same procedure as is

adopted in ABC classification. Only difference is that in HML, the classification unit

value is the criterion and not the annual consumption value. The item of inventory should be

listed to the descending order of unit value and it is up to the management to fix limits for the

three categories. For example, the the management may decided that all units with unit value

of Rs.2000 and above will be H items, Rs 1000 to 2000 M items and less than Rs. 1000, l

items. The HML analyses is useful for keeping control over consumption at department levels

for deciding the frequency of physical , and for controlling purchases.

5) SDE classification

The SDE classification is based upon the availability of items and is very useful in

the context of scarcity of supply. In this analysis, S refers to scarce items, generally imported,

and those which are in short. D refers to difficult items, which are available indigenously but

are difficult items to procure. Items which have to comeform distance places or for which

reliable suppliers are difficult to come by, fall in to D category. E refers to items which are

easy to acquire and which are available in the local strategies

The SDE classification. Based on problems faced in procurement, is vital to the lead-

time analyses and in deciding on purchases strategies.

6) MINIMUM-MAXIMUM TECHNIQUE



The minimum –maximum system is often used in connection with manual

inventory control system. The minimum quantity is established in the same way as any re-

order point. The maximum is the minimum quantity plus the optimum lot –size. In practice, a

requisition is initiated when, a withdrawal reduces the inventory below the minimum level,

and the order quantity is the maximum minus the inventory status after the withdrawal. If the

final withdrawal reduce the stock the stock substantially below the minimum level, the order

quantity will be higher than the calculated EOQ. The effectiveness of a minimum system is

determined by the method and precision with which the minimum and maximum parameters

are established

7) TWO BIN SYSTEM

One of the oldest systems of inventory control is the two-bin system, which is mainly

adopted to control C group inventories. In the two –bin system. Stock of each item is

separated in to two bins. One bin contained stock; just enough to last from the date a new

order is placed until it is received in inventory. The other bin contains a quantity of stock.

Enough to satisfy probable demand during the period of replenishment.to start with , the

stock is issued from the first bin. When the first bin is empty, an order for replenishment is

placed, and the stock in the second bin is utilized until the order material is received

Such a method is appropriate to ideal conditions in which the rate of consumption is fairly

constant and for items. The lead-time of which is fairly established and regular

Although the system itself possesses a high degree of automacy, in practice, we need to allow

for variation in the rate of consumption as well as lead-time. However, for such a system, the

most desirable quantity to re-order is the EOQ. Since the quantity to re-order is fixed in

advance, intiation of replenishment action can be delegated to the lower staff and there is

need to take physical count of inventory levels.



4.1 STATEMENT OF THE PROBLEM

This is a study on the Inventory Management and Valuation. A major problem with

managing inventory is that the demand for corporation’s products is to degree of uncertainty.

The statement of the inventory management is concerned with keeping enough products on

hand avoid running out while at the same time maintaining as small enough inventory

balance to allow for a reasonable return on investment. Inventory is difficult to manage

because it crosses so many lines of responsibility. The supply of the raw materials used in its

production process is also some what uncertain. In addition the corporations on production

contain some degree of uncertainty due to possible equipment breakdowns and labour

difficulties.



4.2 OBJECTIVE OF THE STUDY

To classify the raw material for the better control

To recommend proper inventory management

To suggest suitable measures to improve the inventory management system

To study the effective utilization of inventory

To maintained large size of inventory of raw materials and work in process for

efficient and smooth production and finished goods for uninterrupted sales operation

To maintain a minimum investment in inventory to maximize profitability

To study which item is having the high percentage of usage in the processing of

finished goods.

To study the major raw materials being used in chittoor co- operative sugar limited



4.3 LIMITATIONS OF THE STUDY

The information used primarily from historical annual reports available to the public and

same does not indicate the current situation of the firm.

Detailed analysis could not be carried for the project work because of the limited time

span.

Since financial matters are sensitive in nature the same could not be acquired easily

The study is based on the data given by the finance department which has its own

limitations.

The information is collected only the secondary data

An extensive analysis was not possible is short of time

The study may not be detailed in all respect



4.4 RESEARCH DESIGN

The Term research design is defined as “the ways and methods that are followed in

analyzing the data available”

In the above statement it is quite clear that in order to find out the actual position of

the company the various methods of analysis should be made. The data collected from the

company is analyzed through the following methods.

Data Collection

For this research work the data were collected from primary source as well as

secondary source.

a) Primary source

Primary data was collected from personal interview and through observation and direct

contact in finance deportment



b) Secondary source

Secondary data was collected from Journals, Company broachers and Internet,

and annual reports.

4.5 Statistical tools

Correlation method

Using the correlation analysis we can find whether there is any relationship between the

variables. Correlation and regression analysis show how to determine the nature and strength of

the relationship between variables. The correlation analysis is used to determine the degree of

the relationship between the variables.

Correlation formula:

∑XY - (∑X) (∑Y)

-------------

N

R = ------------------------------------------------

√ ∑X 2 - ∑(X) 2 √ ∑Y 2 - ∑(Y) 2



-------------- -----------

N N

4.6 NEED FOR THE STUDY

To reduce the wastage

To avoid shortage of material

To avoid lack of material

To manage inventory effectively

To meet unexpected demands of material



4.7 SCOPE OF THE STUDY

The present study aims at the following

Highlight the need for and nature of inventory.

Underline need for investing in current assets and elaborate the concept of

inventory management.

Focus on the need for analyzing investment in inventory.

Discuss the process of managing inventory.



Data analysis & interpretationABC ANALYSIS ON THE YEAR 2007-2008

ITEMS QTYQTY

VALUEVALUE % CUMLATIVE%

ABC

ANALYSIS

Lime 45800 1.6 73280 45.49 45.49 A

Sulpher 5906 6 35436 21.99 67.48 A

Desclant 165 74 12210 7.57 75.05 B

Sugarin 72 149 10728 5.65 81.7 B

Sodium hexmeter 95 74 7030 4.36 86.06 B

Seed slary 69 97 6693 4.15 90.21 C

Colourrepitint 42 130 5460 3.389 93.59 C

Antifoam agent oil 81 39 3159 1.96 95.55 C



Idrosulpet soda 150 21 3150 1.955 97.514 C

Magnoflock 8 378.75 3030 1.88 99.44 C

Viscosity reducer 14 65 910 0.56 100.00 C

TABLE 5.1. SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS

(Sources: annual reports and stores department of the KBDSDL)

CHART 5.1 SHOWING THE ABC ANALYSIS

A B C ANALYSIS

01234567

A B C

CATEGORY

INFERENCE


S NO ABC ANALYSIS TOTAL

1 A 2

2 B 3

3 C 6


Above table showing the details for stores differential that material are classified

in A B C. Above 21.99% material given A. than above the 4.36% to below 21.99%

material value is B. than below 4.36% material adding value is C.

ABC ANALYSIS ON THE YEAR 2008-2009

ITEM QTYQTY


ABC

ANALYSIS

Lime 55600 1.6 898960 41.7 41.7 A

Sulpher 10675 6 64050 30.1 71.8 A

Desclant 200 75 1500 7.04 78.84 B

Sugarin 80 150 12000 5.64 84.48 B

Sodium hexmeter 105 75 7875 3.71 88.19 B

Seed slary 75 97 7275 3.42 91.61 B


magnoflock 10 380 3800 1.8 96.37 C




Antifoam agent oil 83 39 3237 1.52 99.49 C

Viscosity reducer 15 66 990 0.51 100 C

TABLE 4.2 SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS


1 A 2

2 B 4

3 C 5



A B C ANALLYSIS

0123456

A B C

CATEGORY



INFERENCE

Above table showing the details for stores differential that material are

classified in A B C. Above 30.1 % material given A. than above the 3.42% to below 30.1%





ITEM QTYQTY


ABC

ANALYSIS

Desclant 4506 75 337950 48.06 48.06 A

Lime 85500 1.6 136822 19.5 67.56 A

Sulpher 15675 6.2 97185 13.1 80.66 B

magnoflock 72 380 27360 3.9 84.56 B

Sugarin 1600 150 24000 3.5 88.06 B

Sodium hexmeter 277 77.5 21467.5 3.15 91.21 C

Antifoam agent oil 490 39.5 19355 2.8 94.01 C

Seed slary 153 98 14994 2.5 96.51 C






1 A 2

2 B 3

3 C 6





A B C ANALYSIS

01234567

A B C

CATEGORY

INFERENCE


classified in A B C. Above 19.5% material given A. than above the 3.15% to below 19.5%

material value is B. than below 3.15% material adding value is C




ITEM QTYQTY

VALUEVALUE % CUMULATIVE %

ABC

ANALYSIS

Desclant 9904 77.9624 772139.6 28.1 28.1 A

Lime 391050 1.6576 648204.5 23.57 51.5 A

Sulpher 67150 6.543 439362.5 15.97 67.47 A

Seed slary 1850 98 181300 6.6 74.07 B

Sodium hexmeter 1950 76.5 149175 5.42 79.49 B

Sugarin 950 155 147250 5.35 84.84 B

Idrosulpet soda 5050 23 116150 4.22 89.06 B

magnoflock 280 386 108080 3.93 92.29 C


Antifoam agent oil 1310 40.0786 52502.9 1.91 98.42 C




1 A 3

2 B 4

3 C 4





A B C ANALYSIS

0

1

2

3

4

5

A B C

CATEGORY

INFERENCE


classified in A B C. Above 15.97% material given A. than above the 3.93% to below 15.97%





ITEM QTYQTY

VALUEVALUE % CUMULATIVE %

ABC

ANALYSIS

Desclant 18005 75 1350375 36.82 36.82 A

Lime 554520 1.6634 922388.6 25.15 61.97 A

Sulpher 69460 6.56 455657.6 12.42 74.26 B

Sugarin 1900 152 288800 7.87 82.26 B

Sodium hexmeter 1700 77.5 131750 3.59 85.85 B

Seed slary 1325 99 131175 3.57 89.42 B

Viscosity reducer 1400 67 93800 2.55 91.91 C



Antifoam agent oil 1829 39.7 72611.3 1.97 98.58 C

magnoflock 136 385 52360 1.43 100 C





1 A 2

2 B 4

3 C 5



A B C ANALYSIS

0123456

A B C

CATEGORY

INFERENCE


classified in A B C. Above 25.15% material given A. than above the 3.57% to below25.15 %




High and medium and low classification

To classification on the raw material in the bases of the quantity value above 100 Rs

is high and 50 to 100 are medium and below 50 are low

THE CLASSIFICATION HIGH AND MEDIUM AND LOW ON THE YEAR 2009-2010

ITEM QTYQTY

VALUEVALUE CLASSIFICATION

Desclant 4506 75 337950 M

Lime 85500 1.6 136822 L

Sulpher 15675 6.2 97185 L

magnoflock 72 380 27360 H

Sugarin 1600 150 24000 H

Sodium hexmeter 277 77.5 21467.5 M

Antifoam agent oil 490 39.5 19355 L

Seed slary 153 98 14994 M

Colourrepitint 96 150 12480 H

Idrosulpet soda 320 22 7040 L

Viscosity reducer 40 66 2640 M



TABLE 5.6 SHOWING MATERIALS &COMPONENTS

S NO H M L CLASSIFICATION TOTAL

1 H 3

2 M 4

3 L 4


CHART 4.6 SHOWING THE H ML CLASSIFICATION

H M L CLASSIFICATION

00.5

11.5

22.5

33.5

44.5

H M L

INFERENCE

The above table showing the detailed for stores material differentiation

the material classified in high and medium and low the above quantity value is 100Rs is high

classification and above 50Rs to 100Rs is medium and below 50Rs is low her high

classification of material is low consumption and low classification of materials is high

consumption and medium classification of raw material is consumption is medium




ITEM QTY QTY VALUE VALUE CLASSIFICATION

Desclant 4506 75 337950 M

Lime 85500 1.6 136822 L

Sulpher 15675 6.2 97185 L

Magnoflock 72 380 27360 H

Sugarin 1600 150 24000 H









1 H 3

2 M 4

3 L 4






00.5

11.5

22.5

33.5

44.5

H M L

INFERENCE









ITEM QTY QTY VALUE VALUE CLASSIFICATION

Desclant 4506 75 337950 M

Lime 85500 1.6 136822 L

Sulpher 15675 6.2 97185 L

magnoflock 72 380 27360 H

Sugarin 1600 150 24000 H









1 H 3

2 M 4

3 L 4






00.5

11.5

22.5

33.5

44.5

H M L

INFERENCE








TABLE 5.9 SHOWING INVENTORY TURNOVER RATIOS:

It denotes the speed at which the inventory will be converted into sales, thereby

contributing for the profits of the concern. When all other factors remain constant, greater the

turnover of inventory more will be efficiency of its management. This ratio is calculated as

follows:

.

YEARCOST OF GOODS

SOLDAVERAGE STOCK

RATIO

IN %

2005-2006 16,82,44,220 23,41,47,888 0.71

2006-2007 3,26,16,707 13,75,97,979 0.23

2007-2008 11,52,46,375 8,30,65,437 1.38

2008-2009 25,75,46,899 18,24,64,927 1.41

2009-2010 38,10,97,458 26,42,10,401 1.44

2010-2011 44,38,68,320 26,57,05,437 1.67

(Sources: annual reports of the KBDSDL)



CHART 5.9 SHOWING THE INVENTORY TURN OVER RATIO

INFERNCE: -

The inventory turnover ratio indicates the efficiency of the firm in producing and

selling its products. A low inventory turnover implies excessive inventory levels than

required for production. The company have high ratio of inventory except in the 2003-04 i.e.

0.23 it is not good. That is all stock stored in gowdons.


INVENTORY TURNOVER RATIO

00.20.40.60.811.21.41.61.8

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

YEARS

RATIO


TABLE 5.10 SHOWING THE RAW MATERIAL TO INVENTORY TURNOVER RATIO

Raw material to inventory ratio = raw materials / inventory

YEAR RAW MATERIALS INVENTORY Ratio in %

2007-08 20474.2 219662803.7 0.0093207412008-09 20474.2 96849740.27 0.02114017200910 20474.2 110043159.00 0.0186056092010-11 20474.2 304641449.5 0.0067207532011-12 20474.2 281582198.3 0.0072711272013-14 20474.2 332338380 0.006160649

Sources: annual reports of the KBDSDL)

CHART 5.10 SHOWING RAW MATERIAL IN TO INVENTORY RATIO

INFRENCE

From the analysis of above data it is infers that the raw material quantum is constant is each

and every year. But the % of raw material to inventory a little up and down movements in

each and every year. Due to changes in variable expenditure in production point


RAW MATERIAL TO INVENTORY RATIO

0

0.005

0.01

0.015

0.02

0.025

2008-09 2009-10 2010-11 2011-122012-13 2013-14

YEARS

PERCENTAGE


TABLE 5.11 SHOWING DAYS IS INVENTORY

The number of days inventory is also knows as average inventory period and

inventory holding period. A high number of days inventory indicates that there is a lach of

demand for the product being sold. A low day in inventory ratio may indicated that the

company is not keeping enough stock on hand to meet demands

Number of day inventory = 365days / inventory turnover ratio

Table showing the inventory turn over days

YEARCOSTOF

GOODS SOLD

AVERAGE

INVENTORY

RATIO IN

%

TURNOVER

DAYS

2007-08 168244220 234147888 0.71 53

2008-09 32616707 137597979 0.23 68

200910 115246375 83065437 1.38 79

2010-11 257546899 182464927 1.41 112

2011-12 381097458 264210401 1.44 150

2013-14 443868320 265705437 1.67 135




CHART 5.11 SHOWING THE INVENTORY IN DAY

Z

\

INFERENCE

The inventory turn over ratio trend over a period for six years was analllyzed

and it was found the inventory turn over ratio has fluctuated every year. And has increased in

the following year from 2003to 2007 this shows that an idle turnover ratio was maintained

and this is considered as positive indicator of operating efficiency and good from the point of

the view of liquidity. The average inventory turn over days will come around days 99.5


INVENTORY TURNOVER DAYS

0

50

100

150

200

2008-09 2009-10 2010-11 2011-122012-13 2013-14YEARS

DAY

S


TABLE 5.12 SHOWING THE INVENTORY TO CURREN ASSET TURNOVER RATIO

Inventory to current ratio = inventory / current assets

YEAR INVENORY CURRENT ASSETS RATIO IN %

2007-08 219662803.70 226868511 96.82

2008-09 96849740.27 114579993 84.53

200910 110043159.00 131888616 83.4

2010-11 304641449.50 313864100 97.1

2011-12 281582198.30 301353353 93.44

2013-14 314228729.9 332338380 94.6


CHART 5.12 SHOWING THE INVENTORY TO CURRENT RATIO


INVENTORY TO CURRENT TURNOVER RATIO

75

80

85

90

95

100

2008-09 2009-102010-11 2011-12 2012-1312013-14YEARS

PERC

ENTA

GE


INFERENCE

From the analysis of inventory to current assets ratio it is infers that the ratio of

inventory to current assets is 2010 is, 2011, and 2012. Respectively it is increased is

inventory position in current assets

TABLE 5.13 SHOWING THE INVENTORY TO FIXED ASSETS TURNOVER RATIO

Inventory to fixed assets ratio = inventory / fixed assets

YEAR INVENORY FIXED ASSETS RATIO IN %

2007-08 219662803.70 115561613 190.1

2008-09 96849740.27 115561613 84.49

200910 110043159.00 115955117 94.9

2010-11 304641449.50 118336877 257.4

2011-12 281582198.30 128679423 218.8

2013-14 314228729.9 130066672 241.5


CHART 5.13 SHOWING THE INVENTOY TO FIXED ASSETS RATIO



INFERENCE

From the analysis of above data it is infers that the ratio of inventory to fixed assets it

is decreasing from 2009 to 2010 in 2011 it increased to 257.4% in 2011 is decreased to

218.8% and in 2012 it is increased to 241.5%

TABLE 5.14 FINDING THE CO RELATIONSHIP BETWEN PURCHASES AND SALES

YEAR SALES PURCHASES

2007-08 201486573.36 117582913

2008-09 130517436 118292431

200910 96920394 109672342

2010-11 124629656 147368921

2011-12 369059519 345673267


INVENTORY TO FIXED ASSETS RATIO

0

50

100

150

200

250

300

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14YEARS

PERCENTAGE


2013-14 359736526 290573567

AIM

To determine whether there is co- relationship between purchases of raw material and

sales-

YEARSALES IN

CROSS

PURCHASES

IN CROSSX 2 Y 2 XY

2007-08 20.148 11.75 405.6 138.06 236.64

2008-09 13.05 11.82 170.30 139.71 154.25

200910 09.92 10.96 98.40 120.12 10.08

2010-11 12.46 14.73 155.25 216.97 183.53

2011-12 36.90 34.65 1361.61 1200.65 1278.58

2013-14 35.97 29.05 1293.84 843.90 1044.92

N=6 ∑X=119.44 ∑Y=122.96 ∑(X)2=3484.35 ∑(Y)2=2659.66 ∑XY=2908.008

FORMULA

∑XY - (∑X) (∑Y)

-------------

N

R = ------------------------------------------------

√ ∑X 2 - ∑(X) 2√ ∑Y 2 - ∑(Y) 2



-------------- -----------

N N

2908.8 – (119.4) (112.96)

---------------------

6

R = --------------------------------------------------------------------

√ 3484.35 – (119.44) 2 √ 2659.41- (112.16)2

----------- ----------

6 6

659.35

R = -----------------

734.5

R = 0.89

CONCLUSION

There is high positive co- relation between sales and purchases of raw

material

6.1 FINDINGS

From the above analysis it is found that the inventory turnover ratio going on

increasing from 2004-05 is 0.23% to in 2008-09 is 1.67%, it leads to the gross profit

ratio going on decreasing



As analysis of the above data it is found that the inventory to current assets ratio is

2004,us 96.82% in 2005 is 84.53% , in 2006 is 83.4% ,in 2007 is 97.1%, in 2008 is

98.44% and is 2009 is 94.6%

As analysis of the above date it is found that the ratio of inventory to fixed assets in

2004 is 190.1% , in 2005 is 83.49%, in 2006 is 94.9% , in 2007 is 257.4% , in 2008 is

218.8% and in 2009 is 241.5%

From high and medium and low classification method mainly three raw material

items were classified high but it is utilization has is lees , remaining four materials

were classified as both medium and low classification but low classification items are

consumption is very high.

The inventory turnover ratio indicates that conversion of the inventory of the cash is

very fast through the study. It is increasing trend.

The inventory tern over ratio has been increasing for the year 2005-06 to 2007-08

Show it is shows the effective and efficiency of the company inventory management

system

Lime and sulper is having the high percentage usage in process of finished goods

The major raw material being used in chittoor co-operative sugar ltd are lime and

sulpher and descalnt

The purchase of raw material are having highly positive correlation sales of finished

goods

6.2 SUGGESTIONS



I suggested that , there is increasing in the inventory turnover ratio, so it may has to

control its cost of production point for the enjoying of high Gross profit ratio

I suggested that, the organization may have to control cost, for increasing raw material to

inventory ratio

I suggested that the organization may have too increase gradually the ratio of inventory to

fixed asset

I suggested that, the organization may have to maintain sufficient portion of cash in

current assets, becos3e is high ratio of inventory to current assets

From the study A B C analysis of raw material the company was good show the company

may be use these method for the their proper utilization and control of raw material

Inventory should be given in accordance the change of technology

Regular feedback should be taken from the inventory management

Implementation of the inventory should be emphasized

Regular inventory must be further updating and modification

The finance department has to maintain the same procedure to develop inventory

management

The company has to concentrate on research and development so that it can use the

inventory efficiently and reduce wastages

Company it should strive for “getting the right goods to the place at the right time for the

least cost”.



6.3 CONCLUSION

Sugar Industry needs inventory for smooth running of its activities. It serves as a link

between production and distribution processes. There is generally a time lag between the

recognition of a need and its fulfillment. The unforeseen fluctuations in demand and supply

of goods also necessitate the need for inventory. It also provides cushion for future poses

fluctuations.

The investment in inventories constitutes the cost of significant part of current

assets/working capital in most of the undertakings. Thus, it is very essential to have proper

control as and when required and to minimize investment in inventors.

The Chittoor Co-operative Sugars Ltd maintain high closing balances of inventory it

leads to over expenditure so company should control over expenditure to maximize profits.



BIBLIOGRAPHY

I. M. PANDEY (2005), “financial management”, ninth edition vikas

publishing house pvt ltd.

S. N. MAHESWARI (2006), “financial and management accounting”,

fifth edition, sultan chand and sons, New Delhi.

C. R. KOTHARI, “research methodology and techniques”. Second

edition, new Agency international pvt ltd.

BAKER. R .P & HOW WELL. A.C, “the preparation of reports”, New York

Ronald press.

S.P. GUPTHA (1995), “statistical methods, “sultan chand and, co New Delhi.

P.RAMMURTY (2005), “production and operation management”, new

agency international pvt ltd.

AHUJA H.L, “economic environment of business, macroeconomic

analysis“, chand&company ltd, New Delhi, 2005.




WEB SITES

WWW. Google.com

WWW.KbdSugar ltd .com

E mail [email protected]



COMPARATIVE BALANCE SHEET OFK B D SUGARS AND DISTILLERIES LIMITED

FOR THE YEAR 31/3/2010LIABILITIES AMOUNT ASSETS AMOUNT

1.SHARE HOLDER’S

FUNDS

SHARE CAPITAL

2.RESERVES &

SURPLUS

3.LOAN FUNDS

SECURED LOANS

UNSECURED LOANS

4.CURRENT

LIABILITIES

TOTAL

274407700

1500000

244421413

88199664

608528777

68061237

1.FIXED ASSETS

NET BLOCK

CAPITAL WORK IN

PROGRESS

2.CURRENT

ASSETS,LOANS &

ADVANCES

INVENTORIES

SUNDRY DEBTORS

CASH & BANK

BALANCES

LOANS & ADVANCES

3.DEFFERED TAX

ASSET

4.MISCELLANEOUS

EXP

5.PROFIT & LOSS

ACCOUNT

TOTAL

322683298

8983008

88530984

10025086

13412400

73222916

40812113

0

118920210

676590014 676590014



PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31/3/2010

DESCRIPTION FOR THE YEAR ENDED 31-3-09

SUGAR

DIVISION

POWER

DIVISION

TOTAL

INCOME

SALES & OTHER INCOME

INCREASE/(DECREASE) IN STOCKS

EXPENDITURE

CONSUMPTION OF RAW MATERIAL

MANUFACTURING EXPENCES

SALARIES,WAGES & OTHER BENEFITS

INTEREST & FINANCIAL CHARGES

DUTIES & TAXES

ADMINISTRATIVE EXPENCES

PRELIMINARY & SHARE ISSUE EXP WRITTEN

OFF

DEPRECIATION

LOSS FOR THE YEAR

PRIOR PERIOD ITEMS NET

LOSS FOR THE YEAR

DEFFERED TAX ASSET

LOSS BROUGHT FORWARD FROM PREVIOUS

YEAR

LOSS CARRIED TO BALANCE SHEET

EARNINGS PER SHARE-BASIC&DILUTE

296377872

-170752644

125625228

46349476

11974752

18335701

29218972

5476000

8444611

332628

18402399

138534539

12909311

426331

12482980

13731589

102254414

101005805

0.03

18949010

0

18949010

15177716

7994118

1596470

13057684

0

124184

0

5182109

43132281

24183271

0

24183271

10343222

4074270

17914320

-0.58

315326882

-170752644

144574238

61527193

19968870

19932171

42276656

5476000

8568795

332628

23584508

181666820

37092582

426331

36666251

24074810

106328684

118920125

-0.54



COMPARATIVE BALANCE SHEET OF

K B D SUGARS AND DISTILLERIES LIMITED

FOR THE YEAR 31/3/2011

LIABILITIES AMOUNT ASSETS AMOUNT



1.SHARE HOLDER’S

FUNDS

SHARE CAPITAL

2.RESERVES &

SURPLUS

3.LOAN FUNDS

SECURED LOANS

UNSECURED LOANS

4.DIFFERED TAX

LIABILITY

5.CURRENT

LIABILITIES

ADD:DIFFERENCE BETWEEN ASSETS & LIABILITIES

TOTAL

13084210

262823490

177589768134789487

85017925

11358435

684663315

102225919

1.FIXED ASSETS

NET BLOCK

CAPITAL WORK IN

PROGRESS

2.CURRENT

ASSETS,LOANS &

ADVANCES

INVENTORIES

SUNDRY DEBTORS

CASH & BANK

BALANCES

LOANS & ADVANCES

3.DEFFERED TAX

ASSET

4.MISCELLANEOUS

EXP

5.PROFIT & LOSS

ACCOUNT

TOTAL

2992341509096115

1754475698068939

2214356

74538394

0

489704

217800007

786889234 786889234






SUGAR

DIVISION

POWER

DIVISION

TOTAL

INCOME



EXPENDITURE





DUTIES & TAXES


PRELIMINARY & SHARE ISSUE EXP WRITTEN

OFF

DEPRECIATION

PROFIT/LOSS FOR THE YEAR



LESS:PROVISIONS FOR TAXATION

FRINGE BENEFIT TAX

DEFFERED TAX ASSET


YEAR


EARNINGS PER SHARE-BASIC&DILUTE

222441131

93221682

315662813

252209073

15498727

22257579

-9471186

0

8125551

0

18422468

307042212

8620601

0

8620601

0

0

8620601

174203111

165582510

-0.36

3792156

0

3792156

2295073

3804721

66548

14739604

0

93238

0

5275531

26274715

-22482559

0

-22482559

0

0

-22482559

29734938

52217497

0.94

226233287

93221682

319454969

254504145

19303448

22324127

5268418

0

8218789

0

23697999

333316927

-13861958

0

-13861958

0

0

0

-13861958

203938049

217800007

0.58







1.SHARE HOLDER’S

FUNDS

SHARE CAPITAL

2.RESERVES &

SURPLUS

3.LOAN FUNDS

SECURED LOANS

UNSECURED LOANS

4.DIFFERED TAX

LIABILITY

5.CURRENT

LIABILITIES

TOTAL

0

-20659974

253408846

105914487

0

362236043

1.FIXED ASSETS

NET BLOCK

CAPITAL WORK IN

PROGRESS

2.CURRENT

ASSETS,LOANS &

ADVANCES

INVENTORIES

SUNDRY DEBTORS

CASH & BANK

BALANCES

LOANS & ADVANCES

3.MISCELLANEOUS

EXP

TOTAL

28402428012520913

3032381118256619

2907579

89584620

367278

700899402 70089401






SUGAR

DIVISION

POWER

DIVISION

TOTAL

INCOME



EXPENDITURE





DUTIES & TAXES


DEPRECIATION




DEFFERED TAX ASSET


YEAR


318251683

107701016

425952699

301448545

40338565

23300302

9463676

29444670

9852517

18529737

432378012

(6425313)

0

(6425313)

0

0

6425313

2805097

0

2805097

1716287

26021

75531

9862397

0

83991

5275531

17039758

(14234661)

0

(14234661)

0

0

14234661

321056780

107701016

428757796

303164832

40364585

23375833

19326073

29444670

9936508

23805268

449417770

(20659974)

0

(20659974)

0

0

20659974






LIABILITIES

AMOUNT

ASSETS AMOUNT

1.SHARE

HOLDER’S FUNDS

SHARE CAPITAL

2.RESERVES &

SURPLUS

3.LOAN FUNDS

SECURED LOANS

UNSECURED LOANS

4.DIFFERED TAX

LIABILITY

5.CURRENT

LIABILITIES


TOTAL

0

-78641650

365142945

68289487

0

467143647

59998

1.FIXED ASSETS

NET BLOCK

CAPITAL WORK IN

PROGRESS

2.CURRENT

ASSETS,LOANS &

ADVANCES

INVENTORIES

SUNDRY DEBTORS

CASH & BANK

BALANCES

LOANS & ADVANCES

3.MISCELLANEOUS

EXP

TOTAL

277254924

4309183

37567689284767625067311

150964503

244852

821934429 821994427






SUGAR

DIVISION

POWER

DIVISION

TOTAL

INCOME



EXPENDITURE





DUTIES & TAXES


DEPRECIATION




DEFFERED TAX ASSET


YEAR


438997392

74444167

513441560

391334724

57600161

31543420

28185073

48400517

8759405

19181903

585005203

(71563643)

0

(71563643)

0

0

71563643

7394652

0

7394652

101786

224679

81853

8788747

0

0

5275594

14472659

(7078007)

0

(7078007)

0

0

7078007

446392044

74444167

520836212

391436510

57824840

31625273

36973820

48400517

8759405

24457497

599477862

(78641650)

0

(78641650)

0

0

78641650







1.SHARE HOLDER’S

FUNDS

SHARE CAPITAL

2.RESERVES &

SURPLUS

3.LOAN FUNDS

SECURED LOANS

UNSECURED LOANS

4.DIFFERED TAX

LIABILITY

5.CURRENT

LIABILITIES


TOTAL

0

-51120343

292832366

110248323

0

257973323

1.FIXED ASSETS

NET BLOCK

CAPITAL WORK IN

PROGRESS

2.CURRENT

ASSETS,LOANS &

ADVANCES

INVENTORIES

SUNDRY DEBTORS

CASH & BANK

BALANCES

LOANS & ADVANCES

3.MISCELLANEOUS

EXP

TOTAL

286606280

5027508

1563062467348982

8755709

14566518

122426

609933669 6009933669






SUGAR

DIVISION

POWER

DIVISION

TOTAL

INCOME

SALES

LESS:EXCISE DUTY

OTHER INCOME


EXPENDITURE






DEPRECIATION




DEFFERED TAX ASSET


YEAR


401903062

27168636

374734427

26118647

-217914213

182938861

103459245

36428063

30564298

27376162

8847793

20407054

227082615

(44143754)

0

(44143754)

0

0

44143754

6086520

0

6086520

0

0

6086520

0

23650

133901

7594511

34834

5276213

13063109

(6976589)

0

(6976589)

0

0

6976589

407989582

27168636

380820947

26118647

-217914213

189025381

103459245

36451713

30698199

34970673

8882627

25683267

240145724

(51120343)

0

(51120343)

0

0

51120343



Source: annual published reports of KBD sugars


Documents

Kbd Sugars