How to calculate the standard of finished products

The standard of finished products is the necessary minimum inventory, which the company is important to have in stock constantly. If the volume of finished products is higher than the calculated standard, this indicates the inefficiency of the distribution of financial flow at the enterprise. When the actual remnants of finished goods in the warehouse are below the normative, this leads to interruptions in the process of selling goods.

You will need

• - accounting data on balances and receipt of finished products;

• - time standards for carrying out warehouse operations.

Instruction manual

1

To calculate the norm of finished product residues in the warehouse, you need to multiply the average daily amount received from production or from suppliers of finished products by the standard time in days.

2

Calculate the total volume of deliveries of finished products to the warehouse for the planning period - year, quarter or month, depending on for what period of time it is necessary to determine the standard of finished products. This figure will be needed to determine the average daily volume of finished products.

3

The calculation is as follows: the balance of products at the beginning of the planning period is summed up with the expected volume of production, which is subject to leave the warehouse in the planning period. Then, from the obtained figure, it is necessary to subtract the volume of products that will be used for the company's own needs, as well as the normative volume of finished product residues at the end of the planning period.

4

Determine the average daily volume of finished products entering the warehouse. For settlements, the month is taken as 30 days, the quarter is 90 days, and the year is 360 days. To find out the average daily volumes of finished products, take the total supply of inventory and divide it by the number of days of the billing period. Since at this stage the calculations are made in kind, for products that have different units of measurement (for example, pieces, kilograms, meters), this indicator should be determined separately for each item.

5

Calculate the time standard, or the so-called sales cycle: the time during which the finished product is in stock from the moment it arrives until the time of shipment. To find out the time standard, you should summarize all the time standards established for warehouse operations, namely: sorting, warehousing, packaging, labeling of finished products, as well as picking goods for each customer or consignee. All of the above time standards in order to calculate the finished product standard should be expressed in days.

6

Multiply the figures obtained: the average daily amount of incoming finished products and the standard time. As a result, you will receive a stock standard for finished products, expressed in physical terms.

7

Convert stock standards of finished goods in monetary terms. For this, it is necessary to multiply the resulting standard by the average price of one unit of output.