Inventory Management MCQs

Safety inventory is the average amount of inventory held in excess of average requirements in order to remove the risk of a stock-out

April 27, 2022

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Safety inventory is the average amount of inventory held in excess of average requirements in order to remove the risk of a stock-out

Q. Safety inventory is the average amount of inventory held in excess of average requirements in order to remove the risk of a stock-out.

A. False

B. True

Answer: True

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Safety inventory is the average amount of inventory held in excess of average requirements in order to remove the risk of a stock-out

Previous

If the supply lead time is certain and demand during the lead time is constant, a company would be able to set a reorder level such that it used the last item just as a new order arrived thus reducing holding costs to a minimum. The reorder level to do this is found as:

Safety inventory is the average amount of inventory held in excess of average requirements in order to remove the risk of a stock-out

Next

If the supply lead time is uncertain, and demand during the lead time is also uncertain, there should be a safety level of inventory. A company may wish to ensure that they are never out of stock. The reorder level to achieve this is found as:

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Cost of abnormal wastage is

Cost of abnormal wastage is

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