Unit 7: Inventory Management Flashcards
True or false? By maintaining a safety stock of inventory, a firm is able to meet customer demand and gain protection against supplier delays.
True. Keeping a safety stock of inventory is useful when shipments from suppliers are delayed or customer demand is unexpectedly high.
inventory is in the process of being shipped through the distribution system.
Transportation
True or false? A periodic inventory system continuously monitors inventory levels and records inventory transactions as they occur.
False. A perpetual inventory system, not a periodic inventory system, continuously monitors inventory levels. Under a perpetual system, inventory transactions are recorded as they occur.
If a firm’s suppliers will only deliver raw materials and replacement parts every two weeks, then the firm should use a _____ inventory system.
Periodic
True or false? A periodic inventory system enables a firm to keep a running balance at all times of the amount of capital invested in inventory; however, it is a costly system to implement.
False. A perpetual inventory system, not a periodic system, has high implementation costs and provides a running balance of how much capital is invested in inventory at all times.
Which of the following would prioritize the inventory items that should be tracked closely?
ABC Analysis
are incurred when a firm that makes subassemblies in-house changes equipment.
Set-up costs
A firm can minimize its total annual costs of ordering and holding inventory by using
the EOQ Model
The time that it takes for an order to reach the supplier’s offices, the time to fill the order, and the shipping time is collectively known as ________.
lead time
The ________ is the time between assessments that will determine average order quantity because the annual demand must be met during one year.
review interval
