Spare Parts Introduction Spare parts should be assessed carefully in respect to their nature, their functions and their future use. Failure to do this, it would lead to a company experiencing significant losses. For example, a company that is responsible for maintenance of a solar power unit needs to assess the nature and use of the spare parts for profit maximization. There has been a discussion as to whether spare parts should be classified as property assets or inventories and this has led to many critical mistakes being made by many companies. Another issue is whether regarding how they should depreciate (Teixeira, Lopes & Figueiredo, 2017). This point of depreciation is determined by the decision made in classifying the spare parts. For …show more content…
These aspects include purpose. Spare parts that are depleted in the process of production or held to be resold are classified as inventories. The time these spare parts are used is another aspect (Minner, 2014). When spare parts are used only once or used in just one period should also be classified as inventories, and those used for more than once should be current assets. However, if the materiality of the spare parts is too small, it would be hard to classify them as inventories because it would be hard to count and keep a record of each asset at a time. These kinds of assets include screwdrivers among many others (Walter, 2015). If these items are in large quantities say thousands of screwdrivers, then they should be classified as …show more content…
The spare parts that are purchased and hold with the aim of maintaining a smooth running of the machines should start depreciating immediately after purchase. But a spare part stored to be used to replace another part in future should begin depreciating after being installed (Birkholz, 2013). Analysis of the facts Most of the spare parts in solar power plant will be used in the production. By getting used, I mean that the spare parts can never be used again in that similar operation. They will ensure proper output of power in this plant. Therefore, they should be classified as inventories. Moreover, these spare parts can only be used over one period. Once they become absolute, they cannot be reused (Walter, 2015). This makes them meet all the qualifications of a spare part to be classified as inventory. Once a piece is installed, it will be removed at a time where its use has been depleted. The spare parts in the solar plant should start depreciating immediately vendors deliver them to the company. The reason for this argument is because, when a solar plant starts working, it would not be advisable to stop the production and wait for delivery of a spare part these parts are purchased to ensure smooth and continuous running of the
...and the useful life of the machine should be calculated. Then, depending on the method used, the total cost of the machine is considered as a long term asset and depreciated over the life expectancy of the asset.
Where are your parents from? What about your grandparents? If you keep asking yourself this question, there will surely be some relative(s) who came here from another country. Spare Parts by Joshua Davis is a story about 4 immigrants that face many struggles in life for being immigrant, but are eager to succeed and will not back down from any kind of challenge.
Spare Parts by Joshua Davis, is a novel that explains the hidden emotional standpoint of how legal documentation status can affect us and our chances of achieving any opportunities that life may throw at us. This novel showcases four undocumented teenagers who were able to break out of their stereotypes, to achieve something that no one had dared to believe they could. Located in Phoenix, Arizona, Carl Hayden High School’s student body is 98% Hispanic, and most of them are illegal immigrants. The students of Carl Hayden held the reputation of useless, poor, and unworthwhile because the majority of the students were living in poverty. With the little that they had, Luis, Lorenzo, Oscar, and Cristian were the firsts to prove that hard work and dedication pays off. Along with the help of their
At the end of the useful life of fixed assets the businesses will dispose, and any amount received from disposal will represent its residual value. This may be difficult to estimate in practice. How ever, an estimate has to be made. If it is unlikely to be significant amount, a residual value of zero will be assumed. The cost of fixed assets less its estimated residual value represents the total amount to be depreciated over its estimated useful life.
Excess inventory. Excess raw material, WIP, or finished goods causing longer lead times, obsolescence, damaged goods, transportation and storage costs, and delay. Also, extra inventory hides problems such as production imbalances, late deliveries from suppliers, defects, equipment downtime, and long setup times.
Inventory refers to a list of goods and materials, or those goods and materials themselves, held available in stock by any business. Inventory are held in order to manage and hide from the customer the fact that manufacture/supply delay is longer than delivery delay, and also to ease the effect of imperfections in the manufacturing process that lower production efficiencies if production capacity stands idle for lack of materials. In simpler words, inventory means store of goods that is held for some purpose or use. Inventory maybe kept “in house,” meaning in the premises or nearby for immediate use; or it may be held in a distant warehouse to be used in the future. Firms that utilize just-in-time methods, more often than not, the term “inventory” implies a stored quantity of goods that exceeds what is required by the firm to operate at the current time. (E.g., within the next few hours)
The information that is provided by the tags that identify the inventory may be so limited that it proves to be of no assistance. Sometimes the tag may be defective in that the machine that is programmed to derive information from it is unable to do so. This means that the inventory will not be delivered where it is supposed to be at the correct time messing up the entire supply chain system. Therefore, care must be taken when information is being fed into the tag.
Selecting the valuation method for reporting and valuing is based on key issues relating to the relevance and reliability of the method of accounting for that item. According to finetuning.com (2005) "how you identify items in inventory and determine which have been sold will depend on the nature of the products, the volume of the products, how they are tracked, and inventory rotation." Key factors to consider under the inventory policy are: location of storage facilities, temperature, security, rotation of stock, cost, training, periodic inventories, and control.
In the context of working capital management, inventory management means the primarily decreasing size of inventory. Companies may have an ideal level of inventories. Big inventory decreases the risk of a stock-out but it desires more working capital. In managing accounts payable, postponing expenditures to suppliers can be used for a flexible and cheap source of financing an enterprise. But late expenditures can be also very costly if the company is offered a discount for early payment. (Deloof 2003)
The goods are of a description which the sellers ordinarily supplies in the course of the business.
Inventory management is defined because a science mostly established art of guaranteeing that just enough inventory share is command with a company to fulfill demand (Coleman, 2000; Jay & Barry, 2006). it's mostly regarding specifying the size and keeping of stacked product. Inventory management is usually needed at completely distinct spots within a service or within multiple spots of a supply network to guard the standard and planned course of production up against the random disruption of running low upon materials or product. The scope of inventory administration also concerns the good lines between replenishment period interval, carrying costs of inventory, asset management, investment forecasting, inventory valuation, selection visibility,
Your solar powered energy program will work appropriately in the event you preserve them. Doing the work oneself can save cash, even when you will save cash using this method yourself.
Toyota has implemented many different systems such as performance monitoring software, the Just in time (JIT) inventory system, electronic quality control system, communication system and information system thought out their value chain which enable to make correct decision during the manufacturing process. They have identified that having large inventories of spares cost them extensive capital and they have implemented the Just in time (JIT) inventory system which advices the suppliers the exact spares that the product line required and provides a time frame. Toyota adopted continuous learning and embraces change allowing their staff to research and innovation (Toyota
In 2014, the value of Property, Plant and Equipment (PPE) for Martinrea Inc. increased by $137,133,000, or 16.2% YoY. Net additions of $201,833,000 in land and buildings, leasehold improvements, manufacturing equipment, other assets, and construction in progress and spare parts increased the total value of PPE. Accumulated depreciation, totaling $110,783,000, brought the net book value down, and conversion from foreign currencies caused the final value to increase by $137,133,000. These additions to PPE are most likely meant for growth of manufacturing and assembly lines, as Martinrea suggests they are purchasing more to invest in expansion programs, which is typical for such a capital intensive business.
Inventory or stock refers to the goods and materials that a business keep for the final purpose of resale or manufacturing. Inventory is a major part of the supply chains. In the manufacturers, inventory includes raw materials used to make and collect products. In resellers, it includes products that acquire to resell to customers. In either case, we need inventory to earn revenue. There are five basic reasons for keeping an inventory, which is Time, Seasonal Demand, Uncertainty, Economies of scale, and Appreciation in Value. Inventory proportionality is the goal of demand-driven inventory management.