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Inventory Cost and Customer Service Overview

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Inventory Cost and Customer Service Overview

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Questions and Answers

What is the primary purpose of maintaining inventory levels according to the passage?

To improve customer service by minimizing stockouts (correct)

To reduce the cost of placing orders and transportation

To maximize profits by reducing costs

To increase operating efficiency by decoupling operations

Which of the following is NOT a benefit of carrying inventory mentioned in the passage?

Allowing longer production runs and reducing the number of setups

Enabling manufacturing to purchase in larger quantities

Reducing the cost of changing production levels (correct)

Decoupling one operation from another and allowing more efficient operations

According to the passage, which of the following is a disadvantage of reducing inventory levels?

Higher annual cost of ordering

Increased likelihood of stockouts and lost customers (correct)

Decreased operating efficiency

Increased transportation and material handling costs

What is the purpose of the ABC inventory classification system mentioned in the passage?

To prioritize individual inventory items to better control inventory and costs Signup and view all the answers

Which of the following is NOT mentioned in the passage as a factor that influences inventory management?

The level of customer demand for the product Signup and view all the answers

According to the passage, how does carrying inventory help improve operating efficiency?

It decouples one operation from another and allows manufacturing to operate more efficiently Signup and view all the answers

What is the relationship between inventory levels and the cost of placing orders according to the passage?

Inventory levels can be reduced by ordering less each time, but this increases the annual cost of ordering Signup and view all the answers

According to the passage, which of the following is a benefit of carrying higher levels of inventory?

Increased operating efficiency by allowing longer production runs and fewer setups Signup and view all the answers

How does the ABC inventory classification system mentioned in the passage help with inventory management?

It prioritizes individual inventory items so that inventory and costs can be better controlled Signup and view all the answers

Which of the following is NOT mentioned in the passage as a factor that influences the cost of transportation and handling?