AUE2601 Assignment 2B (COMPLETE ANSWERS) Semester 2 2024 - DUE 19 September 2024
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Corporate Governance in Accountancy (AUE2602)
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AUE2602
Assignment 4B Semester 1 2024
Unique #:
Due Date: 9 May 2024
Detailed solutions, explanations, workings
and references.
+27 81 278 3372
, QUESTION 1
a.
1. Risk of manufacturing too little inventory
If BubblyFizz produces too little inventory, it faces the risk of not meeting market
demand, leading to lost sales opportunities, dissatisfied customers, and
weakened market position among competitors. Insufficient documentation of raw
materials, as highlighted by the production department, can exacerbate this risk
by causing delays and inefficiencies in production planning and execution.
Manual Controls:
1. Raw Material Inventory Controls:
Implement strict controls and documentation procedures for raw material
inventories, including regular audits and checks. This can help ensure that there
are always sufficient materials on hand for production needs.
2. Production Planning and Forecasting:
Establish detailed production planning and forecasting procedures that account
for market trends, sales forecasts, historical demand data, and seasonality.
Manual periodic reviews of these forecasts by experienced personnel can help in
adjusting production quantities appropriately.
2. Risk of manufacturing too much inventory
Overproducing inventory can tie up capital in unsold stock, lead to additional
storage costs, and risk inventory obsolescence, especially for a company dealing
with perishable goods such as sodas. The absence of a real-time inventory
update mechanism and infrequent physical inventory counting exacerbates this
risk, as the production decisions may be based on inaccurate inventory
information.
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