JUNIOR CYCLE BUSINESS STUDIES Read the text below and answer the questions that follow.
Pizza Products Ltd wants to reduce stock costs and has decided to implement the just- in-time system (JIT). It plans to begin production of 5,000 pizza products at 9 am on Monday morning.
Its suppliers will deliver the stock of ingredients to the factory at 7.30 am on Monday, so that they arrive just in time for production to start.
1. Why does Pizza Products Ltd want to use the just-in-time system? 2. Can you identify any possible problems for Pizza Products Ltd?
VALUING STOCK A business’s stock has two different values:
• The value it bought the goods for (the cost price). • The value it sells the goods for (the retail price).
Cost price
When recording the value of stock in accounts, it is valued at cost price. This is the price the business paid for the goods, not the price it will charge customers for the goods. Example
Dazzle Ltd buys watches from a supplier for €60 each and sells them for €84 each. However, for the purpose of calculating the true stock value of the goods, the watches will be valued at the €60 cost price.
Goods would only be valued at selling price in accounts if the selling price is lower than the cost price. This may happen if goods are not selling and the company reduces the price below cost. The business term for a product that is sold below cost price is a loss leader.
