Fnal - Module 3 Engaging in the Purchasing of Goods or Services2

Republic of the Philippines Department of Education PUBLIC TECHNICAL -VOCATIONAL HIGH SCHOOLS

Unit of Competency

Module No. 3

Module Title

: Perform Purchasing and Inventory of Production Materials : Performing Purchasing and Inventory of Production Materials

1

HOW TO USE THIS MODULE Welcome to the Module “: Performing Purchasing and Inventory of Production Materials”. This module contains instructional materials and activities for you to complete. The unit of competency, Perform Purchasing and Inventory of Production Materials contains the knowledge, skills and attitudes required for the course Entrepreneurship. You are required to go through a series of learning activities in order to complete each of the learning outcomes of the module. Follow these activities on your own and answer the Self-Check at the end of each learning activity. If you have questions, don’t hesitate to ask your teacher for assistance.

2

COURSE

: ENTREPRENEURSHIP IV

UNIT OF COMPETENCY

: Perform Purchasing and Inventory of Production Materials

MODULE TITLE

: Performing Purchasing and Inventory of Production Materials

MODULE DESCRIPTION

: This module covers the knowledge, skills and attitude required to perform the purchase of production materials.

SUGGESTED DURATION

: 10 Hours

SUMMARY OF LEARNING OUTCOMES: At the end of this module, you are expected to: L.O.1. identify criteria in purchasing production materials; and L.O.2. utilize standard inventory control of the production materials.

3

WHAT WILL YOU LEARN? At the end of this module, you are expected to: • learn the criteria in purchasing production materials; and • utilizing standard inventory control of the production material. WHAT DO YOU ALREADY KNOW? LESSON 1

IDENTIFY CRITERIA IN PURCHASING PRODUCTION MATERIALS

WHAT IS THE LESSON ABOUT? This lesson will teach you how to identify criteria in the purchase of production materials. It will guide you on how to utilize a stock card for inventory control of production materials necessary in the continuous operation of the business. WHAT WILL YOU LEARN? At the end of the lesson, you are expected to: 1. learn the benefits and factors in purchasing goods and services by using the set of criteria cited in this lesson; 2. use a stock card for the inventory control of the production materials; and 3. identify local sources necessary in the purchase of production of materials. LET US STUDY WORDS TO STUDY Sourcing is a complete process of obtaining goods and services from preparation and processing of a requisition to receipt and approval of the invoice for payment.

4

Services are intangible products that are not goods (tangible products), such as accounting, banking, cleaning, consultancy, education, insurance, know how, medical treatment, transportation. Stockpile is a comparatively large stock of essential goods or materials, built up to withstand long holdups or scarcity due to natural calamities, strikes, or war. Inventory is an itemized catalog or list of tangible goods or property, or the intangible attributes or qualities. PURCHASING OF GOODS AND SERVICES FROM THE LOCAL SOURCES We are very lucky nowadays enjoying and benefiting from the advantages that technology brings to our life. When we go to the supermarkets and department stores, lots of goods and services are there available for your needs. With various shopping malls we have in the entire Philippines, you will not think of going abroad to purchase the things that you want. As an entrepreneur, you must realize that there are things that are grown like the fruits, plants, vegetables and other natural resources. Other things made and manufactured according to the needs and wants of our target market or customers. Likewise, the services are also made and created according to the felt need of the community. Service is more delicate to manage because it is a work that someone has to provide to others with satisfaction. Why do you prefer to purchase from local sources? Purchasing local goods and services is patronizing our own products resulting to some of the following benefits: • • • • •

it stops the value of colonial mentality not only among young children; it gives additional income to the government through tax collection; it maximizes the use of our natural resources from raw materials to the finished products; it develops the skills of the Filipino people making them more innovative, creative and productive; and it gives affordable price for seasonal and quality products, fruits and vegetables.

Factors do you consider when purchasing goods and services from the local sources? Whether you sell PRODUCTS or sell SERVICES as part of 5

your business, skillful, careful and wise purchasing is an important part of your business. It can determine whether or not you will make a profit. Here are some important points to consider when purchasing goods and services: • study the profile of the local producers • research on the daily average consumption of the customers • know your customers • find out the right place to buy • determine how much to procure • check the track record of each supplier • get the behavior of the patrons towards the products and services • ensure the sustainability of the items LET US REMEMBER In the purchasing activity of the business, the supply of goods and services are vital factors to consider. Supply is the amount of something the customers can avail from the producers who make or grow goods and services. LET US APPLY WHAT YOU HAVE LEARNED Directions: Find out the available goods and services in your community and compare them with other communities using the Venn diagram in any of the following categories: 1. 2. 3. 4.

Profile of the Producers Customer’s Average Consumption Profile of the Customers Right Place to Buy

5. Determine How Much to Procure 6. Check the Track record 7. Behavior of the Patrons 8. Sustainability of the items

VENN DIAGRAM DIFFERENCES

DIFFERENCES

SIMILARITIES

6

HOW MUCH HAVE YOU LEARNED FROM THIS LESSON? Directions: Write capital letter “B” for benefits and “F” for factors in purchasing activity. Copy and answer this evaluation activity on your quiz notebook.

CRITERIA IN PURCHASING MATERIALS 1.

RESPONSE

Knowing the customers you are prospecting

2. Having more tax collections 3. Checking the profile of the suppliers 4.

Becoming more productive and creative

5.

Maximizing the use of the resources

7

As a young entrepreneur, how can you show the responsible ways of purchasing activities on any of the possible situations you may consider? Write your answer on the blank sheets below. 1. ____________________________________________________________ _____________________________________________________________ 2. _____________________________________________________________ _____________________________________________________________ 3. _____________________________________________________________ _____________________________________________________________ 4. _____________________________________________________________ _____________________________________________________________ 5. _____________________________________________________________ _____________________________________________________________

LESSON 2

UTILIZE STANDARD INVENTORY CONTROL OF THE PRODUCTION MATERIAL

WHAT IS THIS LESSON ABOUT? This lesson deals with the inventory control of production resources. You will learn some ways on how to do the controlling function of a business to ensure enough resources in the making of goods and services. WHAT WILL YOU LEARN? At the end of the lesson you should be able to: 8

1. Determine the correct use of the business stock cards; 2. Conduct inventory control of the production materials for the goods and services businesses using stock card.

LET US STUDY WORDS TO STUDY Control is an approach or strategy that checks and balance resources needed in the continuous operation of the business. Inventories are stocks of goods and materials available for production or manufacturing. Process refers to the step – by - step manner of operation making product from raw materials into finished outputs. Stocks are the inventory itself in various forms.

CONDUCTING INVENTORY CONTROL OF GOODS AND SERVICES

One delicate task of an entrepreneur is to maintain an inventory control of goods and services. There must be an assurance that the owner will not run out of stock in the production phase of his business. These are much accounted for from raw materials to the finished expected outputs. All related activities of purchasing require control management. There must be no shortages of materials since sources and supplies are locally checked and available for the business. How do you control inventory of goods and services? It is imperative to determine your production ability, capacity and responsibility. An enterprise must have reliable data about purchasing and manufacturing. A production chart on daily, weekly, monthly, quarterly and yearly basis would help to feed information as basis of parallel consumption of the materials. The use of stock card is a good strategy to control records of stocks of goods and materials. There are three types of inventories described below: 1. Raw-Materials Inventory (RMI). These are stockpile of materials for inputs of production. (Examples are textile in roll and threads in boxes stocked in a warehouse for the garment industry.) 9

2. Work-In-Process Inventory (WIPI). These are partially completed products requiring further processing including sets of unfinished goods for production process. These unfinished items are for fabrication or for further processing stocked in buffer storage. (Examples are the baby dress garments with body parts only waiting for the sleeve and collar sewing operations) 3. Finished-Goods Inventory. These are the final outputs of production ready for delivery to the market or customers. (Examples are bags, shoes, t-shirts, computers, calculators, books and others.) To control is not only to check physically but to list down stocks and balances on a stock card before deciding to do the purchasing activity. It is important to declare the minimum and maximum stock of every item needed in the business operation. The important sources like the suppliers and stores (including business places) are reflected in the stock card including the date of purchase and the price as reference. In this stock card, it is important to update the daily record to tally the actual stocks against what is reflected on the stock card. This would help an entrepreneur to know what, when, where and how many items are to be purchased at a time to sustain the inventory of goods and services. Every stock card must be a reliable piece of reference. All items received and used should be updated at all times. Below are examples of stock cards that you may use. Of course, you may also design your own stock card. The stock card-1 is for itemized inventory record per item or individual; while stock card – 2 is for the collective inventory record of all the files of stock card - 1.

TENEZA’S MEAT & FISH PRODUCT COMPANY

S

C

1

TOCK ARD(Individual/Per Item) Stock Card No. Min. Stock Item: Max. Stock + Deliveries - Withdrawals BALANCE Date (qty./units) (qty./units) (qty./units)

Supplier: Re-Order Stock Withdrawn by: (Person/Department)

10

TENEZA’S MEAT & FISH PRODUCT COMPANY

S

C

2

TOCK ARD(Collective Items from Stock card – 1)

Month

Item

Operation Year: ________ Beginning +Total Deliveries Balance -Total Withdrawals

Cumulative Balance

Below is an example of a filled-up stock card,

TENEZA’S MEAT & FISH PRODUCT COMPANY

S Stock Card No. 1 Item: TVP/Textured Vegetable Protein

Date

+ Deliveries (qty./units)

C

TOCK ARD(Individual/Per Item)

Min. Stock:

3 bags

Max. Stock: 25 bags Withdrawals (qty./units)

BALANCE (qty./units)

1 Supplier: MVC Company Re-Order Stock: 20 bags Withdrawn by: (Person/Department)

Balance Forwarded

20 bags

Ms. Sol Saldivar

2009 May 25 5 bags 26 8 27 4 28 20 bags (OR#1221, P750/bag) 29 5 June 2 16 3 20 bags (OR#1221, P750/bag) 4 1 10 2 11 2 12 2

15 7 3 23 18 2 22 21 19 17 15

Mr. Rene Delfino Jun (Mixing Section) Reynaldo (Receiving Sec) Leony (MVC Co.) Perchy (DepEd) Marian (Packaging Dept) Leony (MVC CO.) Jenny (Shipping Dept.) Via (Manufacturing Dept) Jun (Mixing Section) Reynaldo (Receiving Sec) 11

13 14 15 16 17 18 19 20

1 1 1

14 13 12

Via (Manufacturing Dept) Reynaldo (Receiving Sec) Jun (Mixing Section)

LET US REMEMBER In the successful inventory control management, always remember to take note of the date, items received and withdrawn, supplier sources, minimum and maximum stocks, re-order stock, the price and other data important in the inventory control. The stock card should always be maintained as a tool or basis to control inventory.

LET US APPLY WHAT YOU HAVE LEARNED Directions: Following the Stock Card No. 1 (above) for Textured Vegetable Protein of Teneza’s Meat & Fish Product Company, assume business operation and consider your own business reflecting data on the appropriate columns available. Copy the stock card on your activity notebook and use it on your business now.

Name of your business: ________________________________________

S

C

1

TOCK ARD(Individual/Per Item) Stock Card No. Min. Stock: Item: Max. Stock: + Deliveries - Withdrawals BALANCE Date (qty./units) (qty./units) (qty./units) Balance Forwarded

Supplier: Re-Order Stock: Withdrawn by: (Person/Department)

HOW MUCH HAVE YOU LEARNED FROM THIS LESSON Directions: Choose the correct answers from the ITEM BANK below and write your answers on your quiz notebook.

12

ITEM BANK Finished-Goods Inventory Inventory of Goods and Services Inventory of Services Raw-Materials Inventory Work-In-Process Inventory

Stock Card – 1 Stock Card – 2 Stock Card - 3 Stock Card - 3 Stock Card – 3

1. These are stockpile of materials for inputs of production. 2. These are partially completed products requiring further processing including sets of unfinished goods for production process. 3. These are the final outputs of production ready for delivery to the market or customers. 4. This is the stock card for the collective items of stocks. 5. It is an inventory tool designed for individual item of stocks.

POST-TEST

Directions: Let us find out how much you already know about production cost and pricing of products or services. Answer the questions below honestly and write the letter of the corresponding answer in your activity notebook. 1. Things or products like apple, cucumber, carrots, tomatoes and corn are examples of what products? a. grown products b. manufactured products c. processed products 2. The dresses we have, bags we use and shoes we wear, are examples of what products? a. grown products b. manufactured products c. processed products 3. Maximized use of the natural resources, nurturing entrepreneurial skills of the Filipino people and additional income of the government through tax collection are examples of what in purchasing activity? a. benefits of purchasing activity b. factors in purchasing goods and services c. guidelines in purchasing process

13

4. Assessing the profile of the producers and customers and checking the track record of the suppliers are examples of what in purchasing activity? a. benefits of purchasing activity b. factors in purchasing goods and services c. guidelines in purchasing process 5. These are stock files of materials for the inputs of production. a. finished-goods-inventory b. raw-materials-inventory c. work-in-process inventory 6.

These are partially completed products requiring further processing including sets of unfinished goods for production process. a. finished-goods-inventory b. raw-materials-inventory c. work-in-process inventory 7. These are the final outputs of production ready for delivery to the customers. a. finished-goods-inventory b. raw-materials-inventory c. work-in-process inventory 8. Stock card #1 has information and data that are categorized in what cluster of items? a. collective b. group c. individual 9. Stock card #2 has information and data that are categorized in what cluster of items? a. collective b. group c. individual 10. When you need to purchase or avail of goods and services without the need to leave the country, how do you classify these resources? a. export resources b. imported resources c. local resources

14

RESOURCES: Individual Stock Card for Inventory Purpose Stock Card for the Collective Items REFERENCES: Fajardo, Feliciano R., Entrepreneurship Jorge A. Camposano, Jorge A., MBA, Ph.D., Entrepreneurship for Modern Business San Gabriel, Nati C., Business Finance and Business Firms SEDP, Business Management Teneza, Celedonia T., Ed.D., Worktext in Technology & Livelihood Education in Business Management III, published by Shekinah Publishing and Printing Press Co., Copyright, 2006 Teneza, Celedonia T., Ed.D., & Baes, Ma. Gradiva S., Worktext in Technology & Livelihood Education in Business Management IV, published by Shekinah Publishing and Printing Press Co., Copyright, 2006 Villanueva, Cristina R. & Rojo, Luz V., Technology & Livelihood Education

15

Internet Sources: www.wikipedia.com www.econolib.org www.brittanica.com

MODULE 3 Engaging in the Purchase of Goods and Services PRE-TEST/POST-TEST

KEY TO CORRECTION

1. A 2. B 3. A 4. B 5. B

16

6. C 7. A 8. C 9. A 10. C

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, May 25 – 30, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Gilbert Camayang Cabrroguiz National School of Arts and Trade Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Mr. Fernando C. Agustin Bukig National Arts and Trade School 17

Mrs. Leona M. Tomas San Pedro National High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, June 5 -7, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School

18

Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, July 1to 5, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School

Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Carolina F. Chavez, Aida T. Galuran, Beatriz A. Adriano & Dr. Corazon C. Echano

19

Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

TABLE OF CONTENTS Module Title: Determining Production Cost and Price of Products and Service How to Use This Module . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

Summary of Learning Outcome . . . . . . . . . . . . . . . . . . . . . . . . .

2

What Will You Learn What Do You Already Know Pre – Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

1

Lesson 1: Identify Criteria in Purchasing Production Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 What is this Lesson About What Will You Learn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Let Us Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 5

Let Us Remember Let Us Apply What You Have Learned . . . . . . . . . . . . . . . . . . . .

7

How Much Have You Learned . . . . . . . . . . . . . . . . . . . . . . . . . .

8

Lesson 2: Utilize Standard Inventory Control of the Production Materials . . . . . . . . . . . . . . . . . . . .

9

Let Us Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

Let Us Remember . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

20

Let Us Apply What You Have Learned . . . . . . . . . . . . . . . . . . . . .

13

How Much Have You Learned . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

Post – Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

Key to Correction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18

21