A supermarket with some 10,000 stock items must know very quickly when a stock item requires re-ordering. Describe in detail the type of report that should be used, giving details of how the report format should be set up based on an example for a single item, and how the report will be used by purchasing management.

CPA-Quantitative-Analysis-Section-4 BLOCK RELEASE

The report required in this example would be an Exception report. Due to the high number of stock items, it would be an impossible task for any manager or clerk involved in re-ordering individual stock items to keep track of the situation. For each item that is required to be carefully controlled, so that it does not run out of stock, would be the establishment of minimum and maximum stock levels together with a reorder level. Often a further set of warning levels for minimum and maximum levels would be set. Delivery times must also be factored into the reorder level. The exception reporting system would only report on a given item of stock if any of these levels were crossed. If the stock item was ‘in control‘, that is between the set levels, no report would be made. With exception reporting, only items that are going, or are outside the various levels set for that item would be reported. This means that action is required in some form for any item that appears on the exception report.

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