INVENTORY MANAGEMENT OF TATA MOTORS
TATA MOTORS:
COMPANY PROFILE
Tata Motors Limited one of the largest Indian automobile company is the leader in the commercial vehicle segment and in passenger vehicles. Its revenues could be consolidated to INR 1,88,818 crores (USD 34.7 billion) in 2012-13. It is also the world's fifth largest truck manufacturer and fourth largest bus manufacturer.
TYPES OF INVENTORY USED BY TATA MOTORS:
1. FINISHED GOODS INVENTORY
Finished goods refer to that number of cars manufactured that are anticipating sales to the customer. These are the goods that have undergone all the process of manufacturing but yet to be sold. These goods are accounted in the balance sheet as current assets. The finished goods inventory at the end of the previous accounting period is taken as the opening inventory plus the cost of goods purchased or manufactured and less the cost of goods sold.
2. RAW MATERIALS INVENTORY
This refers to the total cost of all components in present stock that have not been utilised in work in process or finished goods production i-e these are the items yet to be consumed in the production process.
Direct materials - those incorporated in the final product e.g. glass
Indirect materials - those which are not incorporated in the final product e.g. Oil
3. WORK IN PROCESS INVENTORY
This refers to the cost of materials that have entered the production process i-e has been partially converted with work to be done to make it a finished good. It is taken as a current asset in the balance sheet.
4. SUPPLIES AND OTHER INVENTORY
Cost of products directly or indirectly used in the production process which might or might not be a part of the final product.
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...tent rights of the products and is not to use any information in relative to patent rights
• Copy Rights published by TML would remain with Tata Motors.
ADVERTISING
Suppliers are not to use logos or name of Tata Motors to promote its products without proper authentication from Tata Motors.
FORCE MAJEURE
• There is no liability for any of the parties in case of failure or lack of compliance in the following cases:
o Natural calamities
o Actions of public enmity
o Governmental actions
o War/ strikes/lock outs
• In such cases for a period of 3 months parties would discuss and come to plausible future action plan.
COMMUNICATIONS AND LANGUAGE
• Default language of communication is English.
• Periodically review of programmes is done.
• Change of any details used for communication should be informed to Tata Motors by 3 working days.
[6] Colin Drury, Management and Costing Accounting, (7th edition), Chapter 8, Cost-volume-profit analysis, p. 165-173
The Assets consists of: Current assets are highly liquid (cash, receivables, and inventories), Fixed assets can be capital-intensive assets which are permanent, and other assets can be intangible (patents, copyrights, and goodwill).
When a company purchases raw materials it will be recorded in Raw Material inventory. Once the raw materials are used, their costs are transferred to the Work in Process inventory account as direct material. Moreover, direct labor and overhead costs are also charged to the Work in Process inventory (http://novellaqalive2.mhhe.com/sites/0073379417/student_view0/ebook/chapter2/chbody3/product_cost_flows.html). As the process of a production is complete, the goods are transferred to the Finished Goods inventory, and then the finished products are sold. Once the products are sold, the costs are transferred to the Cost of Goods
Alex goes back to his office and shares this information with a man from production and a lady from accounting. They all come to the conclusion that “throughput is the money coming in” “inventory is the money currently inside the system” and “operational expense is the money we have to pay out to make throughput happen.”
1.1.1 All equipment, rolling stock, and tools miscellaneous inventory listed on Exhibit "A", together with any replacements or additions to the equipment, etc. made prior to the closing date.
An equivalent unite of production is reflective of the amount of work that is completed by a manufacturer who may have maintained completed unit on hand that is calculated at the end of the accounting period(AccountingCoach, 2017). Equivalent inventory of production, as you may be aware, is almost always less than the actual inventory. How this is computed is based on the fact that 1 unit is equal to 100% completed units and half that unit is equal to 50% completed units, and at the end of the accounting period, both units are calculated as equivalent(Kimmel, et., al.). The method is used to ascertain the cost per 1 unit of a completed product. For example, if a department begins with 0 units in the inventory, it then began and also completed 10,000 units, but also started another 1000 units but only completed 20% of them. In this example, the equivalent units of production that would be reported in the production cost report would be 10200 units, which is reflected in the fully completed units and the partially completed units. On the surface, it gives the impression that more units are completed that it actually is but is the most effective way for giving management a general idea of how much work in completed at the end of an accounting
Raw materials are inventory items, which are going to be used by the manufacturer in the work process to create components, or for finished goods. These inventory items may be goods or obtained materials that the organisation has produced or extracted. These items may have also been purchased from outside of the company. Generally, these types of items are chemicals, paper, wood, paint, steel, food items etc. Work in process (WIP) includes all the components, assemblies and materials that are being processed or which are waiting to be processed. This inventory contains all materials, including raw materials which are going to be processed into a finished good which awaits approval. A finished good is a finalized product which is ready to be sold to customers. Consequently, a finished good inventory is a stock of finalized products. As mentioned before, these products have been through an inspection after the work in process and after approval, have been transferred to the FGs inventory. After this step, the finished goods can then be sold to wholesalers, retailers or directly to the customers. In the supermarket supply chain, all of the supermarkets such as Asda, Tesco, Waitrose etc. all have inventories mostly of finished goods, as they do not only sell the products of other manufacturers, but they
Hence production units for example the exports that take place in Europe and its Ukraine therefore they have competitive advantage with value into the technology. It gone through the acquisition by natural resource seeking for example Tata Company has invested in coal mines in different country and ownership advantage the company that enables them to successfully acquire established goal companies (KUMAR, 2008).Location advantage of Tata motors has the nature of the product and the services which the company requires to invest In plant or an office (Neelankavil and Rai,2009).In addition the Tata Company has a manufacturing with joint venture and Thornburg automotive gives which them a location advantage again in the south East Asia region. Internationalization advantage of Tata motors will help them in having better control over the manufacturing units as licensing option which are issues related to transfer of technology or technology theft. The advantages of own production for Tata company which they have done is introducing a new car called Nano an ultra low cost car
Term “marginal” is extensively used and known with reference to the economics which means “extra”, whereas with economic view point the marginal cost is the cost of producing every extra unit; however the accounting terminology of “marginal” defines the cost incurred on production other than its fixed cost is the marginal cost. Simply, none of the technique is applied unless it serves the benefits and the marginal costing is used by the firms for its registered benefits. Among all its benefits the primary advantage it serves is its attempt to distinguish the fixed and variable costs, and the method only considers the related variable costs to be included in production cost and the fixed costs are thus later deducted out for ascertaining net profit. The inventory at the year-end is also valued on the bases of variable cost. With all these beneficial characteristics of the said system firms using marginal costing are clearly aware of its ...
Total cost is all of the expenses incurred in the production of a product, to include fixed and variable costs. Fixed costs, are expenses that are constant and do not change from month to month regardless of the amount of products sold. For instance, the rent of the factory is considered a fixed cost, for the reason that, the rent must be paid whether products are produced and sold or not. Variable costs,
WORKING CAPITAL MANAGEMENT “More business fails for lack of cash than for want of profit” Efficient management of working capital is one of the pre-conditions for the success of an enterprise. Efficient management of working capital means management of various components of working capital in such a way that an adequate amount of working capital is maintained for smooth running of a firm and for fulfillment of twin objectives of liquidity and profitability. An inadequate amount of working capital impairs the firm’s liquidity. Holding of excess working capital results in the reduction of the profitability. But the proper estimation of working capital actually required, is a difficult task for the management because the amount of working capital varies across firms over the periods depending upon the nature of business, production cycle, credit policy, availability of raw material, etc.
Inventory is an important variable which exists at all areas of product manufacturing, distribution and sales in addition to being a major portion of total current assets of many organizations. Inventory represents almost 40% of total capital of industrial organizations (Moore, Lee and Taylor, 2003). It represent 33% of assets of the company and as much as 90% of working capital, (Sawaya Jr. and Giauque, 2006). Inventory is a major segment of total investment, it is important that good inventory management should be practiced so that organizational growth and return is ensured.
In costs for stock valuation, all elements related to the production process (Direct and indirec costs) have to be accounted for in getting the accurate cost of a single product. In other words, Direct costs must include all direct materials, labor and other direct costs. Indirect costs must include all production overheads, administrative overheads, selling overheads and distribution overhead costs. All these costs must be included in the stock valuation.
In the early stage, Bajaj Auto Finance was promoted by Bajaj Auto and Bajaj Auto Holdings. The groups flagship company, Bajaj auto is the fourth largest two wheeler and three wheeler manufacturers in the world. Bajaj Auto Holdings basically was an investment company. Later in 2010 the company was renamed as Bajaj Finance Limited.
Of greater importance, job-order costing system needs to accumulate three types of information which include direct materials, direct labor, and overhead. These factors are highly important essentially because of the significant variations in the products produced. Hence, each product or batch has a job identification number and costs are accumulated by a job number. All the more, job-order costing systems requires detailed accounting information and thus the total cost of all jobs is accumulated in one work-in process inventory control account; details of the cost materials, labor, and overhead for each job are kept in subsidiary records called job-order cost sheets (Edmonds, Tsay, & Olds,