APPRAISAL OF INVENTORY MANAGEMENT AND VALUATION IN THE COMPANY (A STUDY OF NIGERIAN BREWERIES PLC 9TH MILE CORNER ENUGU)

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TABLE OF CONTENTS

Title Page                                                                               i

Certification                                                                           ii

Dedication                                                                              iii

Acknowledgement                                                                  iv

Table of Contents                                                                             v

List of Tables                                                                         viii

Abstract                                                                                  x

CHAPTER ONE: INTRODUCTION

1.1     Background of the Study                                              1

1.2     Statement of the Problem                                             3

1.3     Objective of the Study                                                  4

1.4     Relevant Research Questions                                       5

1.5     Research Hypotheses                                                    5

1.6     Significant of the Study                                                         6

1.7     Scope and Limitations of the Study                                       6

1.8     Definition of Terms                                                      7

References                                                                    8

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1     Background Information of Nigerian Plc                        9

2.2     Meaning and Classification of Inventories                     11

2.2.1 Raw Material Inventory                                                          12

2.2.2 The Work-in-Progress Inventories                               12

2.2.3 Finished Goods Inventory                                             13

2.2.4 Supplies Inventory                                                        13

2.3     Inventory Management                                                 14

2.3.1 Stock Purchasing                                                           14

2.3.2 Inventory Holding/Storage                                            16

2.4     Stock Utilization                                                           20

2.4.1 Stock Insurance                                                             20

2.4.2 Stock Coding                                                                 21

2.4.3 Stock Taking                                                                 22

2.4.4  Periodic Stocktaking                                                    22

2.5 Stock Valuation                                                                23

2.5.1 First-in-First-Out (FIFO)                                              24

2.5.2 Last-in-First-Out                                                           25

2.5.3 Weighted Average Cost                                                          26

2.5.4 Standard Price/Cost                                                       27

2.5.5 Lower of Costs/Market Value                                                28

References                                                                    29

CHAPTER THREE: RESEARCH METHODOLOGY

3.1     Sources of Data                                                             30

3.2     Research Design                                                           31

3.3     Population/Sample Techniques                                    31

3.4     Administration of Research Instrument                       34

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1     Data Presentation                                                          35

4.2     Test of Hypotheses                                                      46

4.2.1  Test of Hypothesis One                                                          46

4.2.2 Test of Hypothesis Two                                                          49

4.2.3 Test of Hypothesis Three                                              52

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Findings                                                       56

5.2     Conclusion                                                                    58

5.3     Area for Further Study                                                 60

Bibliography                                                                 61

Appendix                                                                       62

LIST OF TABLES

Table 3.1: Total of Each Department

Table 4.1:   Personal data Presentation

Table 4.1.1: Personal Data Presentation

Table 4.1.2: Is the keeping of stock the sole responsibility of the stores

Table 4.1.3:  How often do you Allow Stocks to Move Out of the Store without Requisition paper?

Table 4.1.4: Do you often run out of stock in your company?

Table 4.1.5:  How often do you Allow Stocks to move out of the store without requisition paper

Table 4.1.5: What do you think axe the likely causes of stock out in your company?

Table 4.1.6: What basis is Stock taking done in Nigeria Breweries?

Table 4.1.7: What type of inventory valuation do you operate in Nigerian Breweries?

Table 4.1.8: Do you agree the adequate inventory management result in profitability?

Table 4.1.9: To what extent do you think that inventory management enhances efficiency and workflow in your industry?

Table 4.1.10: What do you think are the effects of poor inventory management and valuation?

Table 4.1.11: Do you agree that there is need for more inventory control in Nigerian Breweries?

ABSTRACT

This study captioned an appraisal of Inventory Management and Valuation in manufacturing companies in Nigeria. A Study of Nigeria Breweries Plc 9th Mile Corner embarked upon with the view to critically appraising the efficiency of inventory management and valuation in demerits as it concerns manufacturing companies. Reliably, manufacturing companies cannot exist without stocks. Therefore, it is good for every meaningful manufacturing company to take record of its stock. This is because a little deviation form the appropriate way of stock valuation and management will lead to material wastes, reduction in profit and loss of goodwill. Specifically, the aims of this study are; (i) to appraise the management of inventories in terms of merits and demerits as it concerns manufacturing companies and Nigeria Breweries in particular (ii) to ascertain the extent of application of stock valuation methods in manufacturing companies (iii) to ascertain the effect of various stock valuation methods on the reliability of the financial statement (iv) to determine the effects of poor storage spaces, under or over-stocking and non-store record keeping. It is also the objective of this study to make suggestions in a view to helping to solve the problems.

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

It has been observed over the year that inventories constitute the most significant part of current assets of manufacturing companies in Nigeria and the world in general, moreover, in most industrial outlets raw material inventories account for over 50% of company’s cost of production. It is argued that a considerable amount of invested capital are locked up in stock while the cost of keeping (holding) these stocks amount to about one-quarter of the value of the stocks.

Further in the 1930s, most businesses in Europe and America experienced great slumps. This business slump was as a result of stock mismanagement and valuation. It was during this period the businessman coined the statement “stocks are the graveyard of any business”. The successor failure of any business depends in their level of stock management and valuation.

According to the statement of accounting standard (SAS) No. 4, 1986, “Appropriate classification and accurate determination of the quantity and cost of stocks are necessary for proper determination of     the result of the operation of an enterprise and for the presentation of current assets in its balance sheet”.

Further, Olojede 1996, said that in this ha time any good management will want to avoid two danger points usually associated with stock control.

These are:

  • That of inadequate stock which disrupt production and loss of sales and good customers and
  • Excess stock which constitute carrying costs and obsolescence risk.

As far as manufacturing companies are concerned stocks exist in various form; raw materials work-in-progress, finished goods and engineering spare parts/consumables. The stock of raw materials, work-in-progress and engineering spare parts/consumerable facilities production, which stock of finished goods is required for smooth marketing operation. Excessive investment in stock will cause unnecessary tie up of the firms fund increase in carrying cost (cost of keeping stock), and risk of liquidity while under-stocking will cause production hold-ups failure to meet delivery commitments and possible reduction in profits. Therefore, the aim of stock management should be to avoid excess and inadequate levels of stock but to maintain sufficient stocks for the smooth production and sales operations.

Infact, this study will seek to identifying and appraise the various stock management and valuation methods in manufacturing companies and in Nigeria Breweries in particular.

1.2     STATEMENT OF THE PROBLEM

APPRAISAL OF INVENTORY MANAGEMENT AND VALUATION IN THE COMPANY (A STUDY OF NIGERIAN BREWERIES PLC 9TH MILE CORNER ENUGU)