Accounting for materials, JIT, & Backflush

Question 1

Inventory management requires the firm to balance the quantity of inventory on hand for operations with the investment in inventory. Two cost categories in inventory management are order costs and carrying costs. Which of the following is true?

Answer 1

A. The carrying costs including handling costs, interest on capital and obsolescence

Question 2

The EOQ model is a deterministic model that calculates the ideal order quantity (or production lot) given specified periodic demand, the cost per order or production run, and the periodic carrying costs per unit. The EOQ model

Answer 2

A. Minimizes the sum of inventory carrying costs and either ordering or production of setup costs.

Question 3

Not an element in the EOQ formula

Answer 3

C. Safety stock