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Questions and Answers
What is one of the benefits of inventory control?
What is one of the benefits of inventory control?
- To eliminate all inventory
- To minimize inventory costs (correct)
- To increase inventory costs
- To maximize inventory levels
What type of product is considered a basic input that is converted into a finished product through the manufacturing process?
What type of product is considered a basic input that is converted into a finished product through the manufacturing process?
- Work-in-progress
- Supplies
- Raw Materials (correct)
- Finished Goods
What is an example of a factor that affects inventory control?
What is an example of a factor that affects inventory control?
- Type of transportation
- Type of storage facility
- Type of management
- Type of product (correct)
What is the purpose of Work-in-progress inventory?
What is the purpose of Work-in-progress inventory?
What is an example of a supply in inventory control?
What is an example of a supply in inventory control?
What is the primary goal of stabilizing employment through inventory management?
What is the primary goal of stabilizing employment through inventory management?
What is a key aspect of maintaining a healthy labor relationship through inventory management?
What is a key aspect of maintaining a healthy labor relationship through inventory management?
What is a potential outcome of effective inventory management in terms of labor relations?
What is a potential outcome of effective inventory management in terms of labor relations?
What is a key consideration when developing an inventory management strategy to improve labor relations?
What is a key consideration when developing an inventory management strategy to improve labor relations?
What is a potential benefit of integrating human resource planning with inventory management?
What is a potential benefit of integrating human resource planning with inventory management?
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Study Notes
Inventory Concept
- Inventory refers to the value or amount of materials or resources on hand, including raw materials, work-in-process, finished goods, stores, and spares.
Importance of Inventory Control
- Balances the stock-out cost/opportunity cost due to loss of sales against the costs of inventory.
- Minimizes losses due to deterioration, obsolescence, damage, pilferage, etc.
Benefits of Inventory Control
- Ensures an adequate supply of materials.
- Minimizes inventory costs.
- Facilitates purchasing economies.
- Eliminates duplication in ordering.
- Better utilization of available stocks.
- Provides a check against the loss of materials.
- Facilitates cost accounting activities.
- Enables management in cost comparison.
- Locates and disposes of inactive and obsolete store items.
- Provides a consistent and reliable basis for financial statements.
Types of Inventory
- Raw Materials: Basic inputs converted into finished products through the manufacturing process.
- Work-in-Progress (Intermediate Products): Semi-manufactured products that need further work before becoming finished goods.
- Finished Goods: Completely manufactured products ready for sale.
- Supplies: Office and plant materials not directly entering production, but necessary for the production process, with no significant investment (e.g., tools and equipment).
Objectives of Inventory Control
- Meet unforeseen future demand due to variations in forecast and actual figures.
- Average out demand fluctuations due to seasonal or cyclic variations.
- Meet customer requirements timely, effectively, efficiently, smoothly, and satisfactorily.
- Stabilize employment and improve labor relations by inventorying human resources and machine efforts.
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