Inventories constitute the most significant part of
current events of a large majority of companies in Nigeria and indeed many
other part of the world. Because of the large size of inventories maintained by
firms, a considerable amount of fund is required to be committed to them.
Therefore, the efficient and effective management of inventories becomes
imperative in order to achieve unnecessary turnover or to minimize the cost
associated with keeping inventories. The neglect of inventory management and
control by a firm will amount to jeopardizing its long run profitability and
may even cause the firm to fail ultimately. Inventory is defined as the stock
of any item or material used in an organization. Therefore, an inventory
management is the set of policies and control that monitor levels of inventory
and determines the following:-

i.      What level should be
maintain

ii.     When stock should be
replenished.

iii.    How large order should be

However, inventory can include input such as human
resources, financial, equipment e.t.c and output such as parts or component. It
is possible for a company to reduce its level of inventories to a considerable
degree without any adverse effect on production and sales by using inventory
planning and control techniques. The reduction in excessive inventory carries a
favorable impact on company profitability (Pandey 1999) in doing this however,
care should be taken to avoid under stocking which directly affect production
causing stoppage, loss of sales, loss of good will. etc. Inventory forms a link
between production and sales of a product. A manufacturing company must
maintain a certain level of inventory in the form of raw materials, work in
progress and finished goods. Raw materials inventory gives the firm flexibility
in its purchase, without it, a manufacturing company must exist on a hand-to-
mouth basis buying raw materials in keeping with its production schedule.
Work-in- progress are items of stock that are subjected to further processing
to produced the finished product. Finished goods inventory allows the firm
flexibility in its production scheduling and in its marketing thus there is on
incentive to maintain large stocks of all three types of inventory. In an
inflationary environment like Nigeria, there is the need to adopt a realistic
inventory valuation method in order to give correct value of inventory in the
profit and loss account and in the balance sheet which would have otherwise
show an appropriate financial position of the organization and thus negating
the purpose of accounting which is the provision of accurate financial
information to investors, shareholders, management, government and her agencies
and other related interested parties in order to assist them in taking decision
about the organization. It is in view of this that the need arises for an
appropriate management and control measure to maintain the most accurate level
of stock that will assist management of the organization carryout business in
such a way that it does not portray the organization in bad shape.

1.2     
STATEMENT
OF THE PROBLEM