Inventory Carrying Costs Paraphrasing Out Finance Essay - Free Essay Example

Sample details Pages: 5 Words: 1544 Downloads: 9 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? Inventory carrying costs can be defined as the cost related to hold / store in the inventory. The inventory costs are considered to be the highest hidden and unknown costs in the world of business. Most of the managers consider inventory holding costs normally from 15 to 35% of the inventory value, but on the other hand there are also some businessmen and co-operations which do not consider the inventory carrying cost even though these costs are real and substantial and matter a lot. The cost of carrying inventory has a direct relation with the number of ware houses that a company have but also on the firms distribution polices, for example if we have same customer service level, low inventory carrying cost could result in the use of different ware houses which can also slows down the mode of transportation such as railroads. Whereas the high inventory carrying costs could lead in limited number of stock ware houses which save time and results in faster transportation by motor carriers or aircrafts in order to provide same service in both the cases. If we dont know the exact and accurate estimation of inventory carrying cost of a firm, then that firm or company will not be able to choose the distribution policies which would minimize its costs, but if we know the accurate total cost associated with carrying cost of inventory then we know the cost tradeoffs which can be made within the logistics system. Don’t waste time! Our writers will create an original "Inventory Carrying Costs Paraphrasing Out Finance Essay" essay for you Create order Fig-1 illustrates the tradeoffs that are necessary when developing policies like customers service levels, purchasing policies, transportation policies and warehousing systems if maximum corporate profitability is to be realized. The basic Cost Categories There are 4 basic types of cost which should be considered wile calculating the inventory carrying cost which are: Capital costs Inventory service costs Storage space cost Inventory risk costs. These are explained in detail as follow Capital Costs Most of the businessman is of the view that investing inventories is relatively liquid and riskless investment because they feel that they will get somewhat a lower return on the inventory investment. However holding inventory requires capital which could have been used in other investments and by investment money as inventory the company/ firm foregoes the rate of return that could be obtained by doing such type of investment. Therefore the companys opportunity cost of capital should be applied to the investment in inventory. Moreover this cost of capital should be made by out of pocket investment in inventory. Many companies also use some variation of absorption for the inventory valuation; in this they consider only the manufacturing costs that are relevant which are cost of capital, the companys minimum acceptable rate of return should be applied to the variable costs which are directly related with the inventory. The measurement of the cost of capital is very complex. Lets consider an example From the article same to same The coupon rate on bounds is not an accurate measure of cost of debt capital, so to measure the cost of debt capital; the impact of the marginal use of debt on the market price of common stock must be eliminated. Also from the fig. used for the cost of capital will depend on whether the security valuation is made on the basis of investment opportunities, stream of dividends, stream of earnings or discounted cash flow. What is required is a straightforward method of calculating the cost of capital that can be easily understood and applied by businessmen. In most business situations available capital must be rationed to the most attractive investments possibilities. James Moa has explained the concept of a hurdle rate the rate over which the projects will be accepted rate of return for use in the situations where capital is rationed. He defined the rate as the rate of return on the marginal investments, due to the principles of opportunity costs. Consider an example, a firm which pays 10% for funds that it acquires and because of capital rationing the marginal investments promising annual returns of 15%, although the cost of capital is only 10%. This means that relevant time value of money is measured by the return on the most profitable investments. Of course this 15% hurdle rate could also be selected as the cost of capital to the firm. The hurdle concept should be used in order to calculate the actual cost involved. It must be used by the companies experiencing capital rationing, and where the capital rationing is not used the capital invested in inventory is expected to earn a rate competitive with a marketable security and other liquid investments of a firm. Inventory Service Costs: The inventory service costs include the insurance and tax costs. The tax costs vary from state to state depending on the state the inventory is held. If the inventories are exempt to 19.8% of the assessed value than the tax rate may range from zero in those states like in Indiana State. Generally the taxes have a direct relation with the inventory levels like if the inventory level is increasing than the tax rate will also increase or vice versa. While on the other hand the insurance rates are not strictly proportional to the inventory levels, because insurance is usually purchased for a specified time period and insurance policy will be revised periodically based on the expected inventory changes. There are other different reasons that how the insurance rates vary like, they could be affected by the types of materials used in the construction of the building to house the inventory, the buildings age and considerations such as the types of fire prevention equipment installed. Storage Space Costs: In storage space cost 4 types of facilities should be considered which are: Plant warehouses. Public warehouses. Rented (leased) warehouses. Privately owned warehouses. These are explained in detail as follow: Plant warehouses: The costs related to plant warehouses are mostly fixed in nature but there are some variable costs such as the cost the cost of taking inventory and other direct expenses should be included in inventory carrying costs. Incase if the warehouse space is rented or used for some productive purpose but not for storing inventory only then fixed charges and allocated costs are concerned otherwise they irrelevant. Space in Public warehouses: Some things Copied The space in public warehouses is usually rented on a dollar per hundred weight or on a volume occupied basis. As the public warehouses is the most economical way to provide the desired level of customer service without incurring excessive transportation costs. Due to this reason mostly the costs related to public warehouses are considered as throughput costs and only charges for recurring storage that are explicitly or implicitly|(select other words) included in costs. and more the cost of capital related with holding inventory in public warehouses must be included in the cost of carrying inventory. This cost is equal to the variable manufacturing cost plus variable distribution cost, multiplied by the opportunity cost of capital or the hurdle rate. Rented (leased) warehouses: Rented or leased warehouses are normally contacted or leased for a specified period of time. The amount of space which is rented depends upon the maximum amount needed for the period of contract. The warehouse rental charges are fixed and do not vary from day to day with the change in the inventory level, but while on the other hand the rental charges may vary to month to month or year to year until a new contract is made. In most case the rented warehouse charges are mostly fixed but some may vary with the amount of inventory held. In any case these costs could be abolished by not renewing the contract. However these costs should not be included in the inventory carrying cost but in the warehousing cost category. (See exhibit 1). Fig.1 Privately Owned warehouse copied All the operating costs could be eliminated by closing down a privately owned warehouse or the net savings resulting from change to public warehouses should be included in warehousing costs and not I the inventory carrying costs. Inventory Risk Costs: Copied Inventory risk cost is a type a variable cost that varies from company to company. It includes charges for obsolescence, damage, pilferage, and relocation of inventory. The cost of obsolescence is the cost of each unit which must be disposed of at a loss because it becomes old. The costs associated with the damaged goods should be included only for the portion of damage which is directly attributable to the volume of inventory held. The damage incurred during shipping is considered a throughput cost since it will continue regardless of the inventory level. Problems associated with the inventory risk cost: Shrinkage: The problem of shrinkage occurs due to pilfering. (i.e. inventory theft) for American businessmen. They consider this problem more an important than cash frauds or cash embezzlement, because it is hard to control and this cost may be closely related to company security measure than inventory level depending upon the number of warehouse locations. Relocation cost: (copied) Relocation costs are the cost associated with the transshipment of inventory from one warehouse to another to avoid obsolescence. Mostly these costs are the result of tradeoffs between transportation and warehousing costs and not relevant for the inventory holding cost.

Commentary of Adam Liptak´s Article Regarding Gay Marriage...

Adam Liptak, a journalist for the New York Times, explained in Utah, in Opposing Gay Marriage, Find Three Arguments are Better than One why a heterosexual relationship is better for raising children in. The Utah law that would have allowed same sex couples to marry was recently shot down. Liptak goes on to explain why he agrees with the bill not being passed. The article states that this was important in â€Å"holding up and encouraging man-woman unions as the ‘preferred’ arrangement in which to raise children† (Liptak, 2014, para. 12). This discrimination towards same sex couples wanting to raise children is appalling. Homosexual couples should have the right to raise children just as heterosexual couples do. Liptak argued his point by raising his concern for responsible procreation within society. He suggested that responsible procreation was between a man and woman inside of marriage. However, denying the right to marry and adopt to same-sex couples the govern ment is helping to increase the norm of sex and child raising outside of marriage. A lot of work and thought must go into the adoption of or alternative conception of a child. These processes are time consuming and the couple must put much thought and effort into having and raising a child before acquiring one through adoption, foster care, or using alternative conception methods. Children raised in a loving, nurturing environment have the largest advantage no matter the sexual orientation of the couple. According

The Meaning and Use of Arithmetic - 963 Words

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Reading Comprehension and Memory (Short Term) A few questions will test the participants ability to recall very short passage/sentences verbatim and write their responses into a computer based program that will calculate their performance. In order to replicate the sentence, the reader must be able to comprehend it to a certain extent, thus measuring reading comprehension as well as memory. Visual Comprehension and Memory Participants in the IQ exam, will take a CBT; thus, the limits of a PBT eliminate the limits.Show MoreRelatedVon Neumann architecture, or the Von Neumann model, stems from a 1945 computer architecture1100 Words   |  5 Pagesfor an electronic digital computer with a control unit containing an instruction register and program counter , external mass storage, subdivisions of a processing unit consisting of arithmetic logic unit and processor registers, a memory to store both data and commands, also an input and output mechanisms. 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Life Is A Matter Of Life - 1464 Words

The concept of life itself is quite simple. Biologically the purpose of life is far less open to interpretation, remaining in the general area of keep living and reproduce so to keep life going. However, it is when people try to add significance and value to life that things become convoluted. Why is that? Because one may say that the value of life is one thing, then another may say something else. But which one is right? Both and neither—to put it simply. In that there is neither a wrong nor right way to view life; for it is all a matter of perspective. However, it brings up the question: if the value/ significance of life is a matter of perspective that an individual must interpret and give, could it be that there is no true value/ significance to life? To answer the question bluntly-- no, there is no true value of life, but there are different ways to view life, may it be positive or negative. With those views being influenced by the experiences one has gone through. There is nothing that is quite as rare in the universe like life. It is only known to exist on one plant out of about 200 billion. Although life is considerably rare in the vast scale of things, people tend not to place much value on life itself. However, value is placed on the things that come with life, for instance knowledge and what that knowledge can get them. â€Å"An investment in knowledge always pays the best interest.† (Franklin The Way to Wealth: Ben Franklin on Money and Success) So life canShow MoreRelatedIs Fetus Life Matter?1115 Words   |  5 PagesFetus life matter 1969 was not a normal year for eight month pregnant Teresa Keeler and her unborn baby. Sadly Teresa was beaten very badly by her ex-husband. Before the incident happen her husband told Teresa that he was going stomp out of her .with God mercy, the unborn baby was delivered a live with fractured skull. The persecutor tried to accuse the ex-husband with the beating his wife and attempt of murder of the fetus. 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Eth/316 Community Profile Comparison Free Essays

Community Profile Comparison ETH/316 October 10, 2012 Community Profile Comparison ( Demographic Comparison Table (Camden, NJ/Princeton, NJ) Population| | Camden, NJ| Princeton, NJ| Total Population CaucasianAfrican AmericanAsianOther| 78,79017%52%3%28%| 13,38180%6%7%7%| Median Age| 28. 5| 37| Household Demographics| | Camden, NJ| Princeton, NJ| Median Home Price| $81,600| $677,400| Median Household Income| $29,042| $83,509| Percentage of Married Population| 19. 86%| 67%| Families with children under the age of 18| 60%| 46%| Educational Demographics| | Camden, NJ| Princeton, NJ| High School DegreeFour Year DegreeGraduate Degree| 51. We will write a custom essay sample on Eth/316 Community Profile Comparison or any similar topic only for you Order Now 33%3. 70%1. 98%| 94. 67%30. 33%41. 24%| Community Amenities| | Camden, NJ| Princeton, NJ| SchoolsLibrariesParksChurches| 4681613| 211211| Community Affiliations| | Camden, NJ| Princeton, NJ| Religious Majority| Catholic: 32. 74%| Catholic: 28. 60%| Political AffiliationDemocratic PartyRepublican Party| 67. 37%31. 23%| 67. 29%31. 2%| Crimes: Per 100,000 Residents| | Camden, NJ| Princeton, NJ| MurderRapeRobberyVehicle Theft| 46. 892. 3900. 3656. 3| 0. 00. 029. 737. 2| Responsibilities of the Individual to the Community No matter who you are or where you live, we are all part of a bigger community. As an individual, we are still part of a family be it big or small. We all are someone’s neighbor in a , tribe, village, city, county, state, region, country and the world which makes us inherently responsible to each other. At the same time, full human potential cannot be reached if individuality is suppressed by society, First and foremost, the duties of each individual within any community are cooperation, respect and participation. An individual must think beyond themselves and always be vigilant that they are just a part of a larger intently even if the individuals in that intently have different believes, religions or interests . In all free societies there is a constant struggle between individual rights and individual responsibilities. According to the U. S. Department of State, every Individual right has a corresponding duty to the community and the bottom line is that all have the responsibility of the individual to watch over others in the a community to make sure that common ste standards are objective are obtained and that they are beneficial to all. According to John B. Cobb, Jr. , Ph. D. who is Professor of Theology Emeritus at the Claremont School of Theology, † In a community the idea of the common good takes on a far richer meaning than in a society understood as founded only on a compact and made up of atomic individuals. Because the good of each is bound up with the good of others, we can consider which changes in the society as a whole conduce to the good of those who participate in it. † If you choose or not to be a part of a community, we still have the same obligations to the community of which we are a part. Responsibility of the Community to the Individual Defining Social Responsibility within the Community Conclusion References Princeton, NJ Livability Score. (2012). areavibes. Retrieved from http://www. areavibes. com/princeton-nj/livability/   trulia. 2012). Princeton Township Real Estate Overview. Retrieved from http://www. trulia. com/real_estate/Princeton_Township-New_Jersey/   Sperlings. (2010). Best Places to Live in Camden, New Jersey. Retrieved from http://www. bestplaces. net/city/new_jersey/Camden   U. S. State Census Bureau. (2010). New Jersey. Retrieved from http://quickfacts. census. gov/qfd/states/34000. html Cobb, J. B Jr. (2011) The Common Good: Individual Rights a nd Community Responsibility Retreived from http://www. religion-online. org/showarticle. asp? title=3351 How to cite Eth/316 Community Profile Comparison, Essay examples

Superannuation of Frank & Heather Barnes-Samples for Students

Question: Discuss about the Superannuation of Frank and Heather Barnes. Answer: Develop Appropriate Strategies and Solutions The review of the current structure and the investment strategy of Edithvale Retirement Fundhas been discovered to have a total asset of $625K. In this respect, the member account of Frank is $380,000, for Heather is $220,000 and for ben is $25,000. It is seen that the asset that is available in the Edithvale Retirement Fund has been segmented into $39,000 for Cheque Account, $50,000 for Term Deposit 1, $25,000 for Term Deposit 2, $211,000 for Share Portfolio and $300,000 for managed funds. It is even seen that the investment strategy has to be increased in order to increase the income that would help ben in undertaking a loan for the purchase of the commercial property. The compliance issue that is existent with the fund is that it has to maintain a minimum amount of fund so that it can be helpful in purchasing the commercial property where Frank operates his business. Frank pays a rent of $75k for the commercial property and in order to purchase the property the fund needs to incre ase their level of return by undertaking new investments and by increasing the fund value of the share portfolio and the managed funds. When an individual looks to transfer the their business property into their retirement fund, it is essential to consider a number of issues like the allowable assets, stamp duty, tax consequences and the GST issues. The transfer of the business property to the retirement fund will be possible with the help paying the capital gains and considering the tax and VAT issues. It is even essential to understand the contribution rules and the risks associated with it. The transformation can be completed by paying the administrative charges as well as the taxes that are applicable to be paid. The transfer of the business property to the retirement fund would help maintain the income level of Frank even after retirement. Ben does not have the capability to pay $ 1 million for the mortgage and therefore transferring the business property to the retirement fund and not seeling the business would mean that the fund would have a higher value leading to the banks granting loan for the purchase of t he property. The recommendation that can be given is paying off the capital gains and the other existing taxes so that there are no obligations from the government thereby increasing the fund balance of Edithvale. A strategic planning needs to be undertaken for the clients and it is seen that the fund will be created in such a way so that the expectations of Frank, Heather and Ben can be met. The tax planning and structuring that requires to be paid by the client includes the capital gains tax and GST. Ben does not need to the taxes as his fund amount is $25,000. The couple are in the planning of retiring and therefore it is recommended that the business property is transferred to the Edithvale Retirement Fund thereby improving their income. Ben requires to invest in a superannuation fund in order to increase his income and create a fund for future retirement. The management of the risk should be done by taking advice from the solicitor and accountants so that they can provide recommendations and advise that would reduce the level of risk. The protection of the asset is possible by taking help of the accountant and analysing the market from time to time and investing in the appropriate fund th ereby improving the rate of return. The investment advice should be taken from a proper consultant while the management cash flow should be done by the accountant. The level of income and expenses should be maintained in an appropriate manner thereby maintaining profit for the client that can be used for investment purpose. Personal budgeting should be done by allocating the amount that would be spent on various areas and thereby improving the return for the client. Strategies and Negotiate Solutions The strategies that would be given to the client would be presented in the form of a formal document where all the recommendations would be written down in an effective manner and this would provide a proper idea to the clients. A meeting will be fixed with the client where all the requirements and the strategies would be addressed in an effective manner so that the clients can gain knowledge and in case of any queries can address them to the consultants. The steps of explaining the existing assets into superannuation would be done with the help of proper presentation and explaining each and every step and the concessions the clients are supposed to receive. With respect to the special contributions the Frank and Heather are liable for such contributions as they have crossed the age of 60 years. Real estate transfer is possible to the retirement fund as the client have their own house. Concession on capital tax implication is available for Frank and Heather but not for Ben. The two concerns that the clients may raise would be the level of risk associated and what can happen in case of changes in the market and valuation of stock. It is observed that such issues can be resolved by answering that the level of risk is low with the help of suitable evidence and with respect to changes in the market; the client can at any time withdraw the money and can invest in any other kind of portfolio. The clients are proposed a portfolio review and financial plan review so that the investment fund can be managed appropriately. The client would be provided financial review plan and portfolio review so that proper assessment of the managed fund can be undertaken. The associated fee includes the consultation fee and the management fee of the portfolio. Bibliography Arnold, Bruce, et al. "Partner-Scale Economies, Service Bundling, and Auditor Independence in the Australian Self-Managed Superannuation (Pension) Fund Industry." Auditing: A Journal of Practice Theory 36.2 (2016): 161-180. Bird, Ron, et al. "Experiences of Current and Former Members of Self-Managed Superannuation Funds." (2016). Cummings, James R. "Effect of fund size on the performance of Australian superannuation funds." Accounting Finance 56.3 (2016): 695-725. Earl, Joanne K., et al. "Financial literacy, financial judgement, and retirement self-efficacy of older trustees of self-managed superannuation funds." Australian Journal of Management 40.3 (2015): 435-458.