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Querist : Anonymous

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Querist : Anonymous (Querist)
26 January 2010 explain in your word.
Q.1- what is scrap and spoilage? are they fixed in nature ? give some examples of these losses.
Q.2- what is inventory turnover ratio ? and for what purposes companies use this ratio.
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CA SURENDRA KUMAR RAKHECHA

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CA SURENDRA KUMAR RAKHECHA (Expert)
26 January 2010 1. Scrap is unavoidable normal loss during production process. By nature these are fixed. For example; we cannot avoid some loss of oil despite very good packing.

2. Spoilage means those defective goods which cannot be rectified. These are due to some special circumstances hence its nature is not fixed.

3. Inventory turnover ratio shows how much time it rotates. For example if we have inventory of 500 kgs all the time and per annum consumption is 5000 kgs it means inventory turnover is 10.

The purpose of this is to know the usefulness of the inventory. More is the turnover; more it is useful.
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