The ABC Approach to Inventory Management Is Based on the Concept

question 333

Multiple Choice

The ABC approach to inventory management is based on the concept that:

• A) Inventory should arrive just in time to be used.
• B) The inventory period should be constant for all inventory items.
• C) Basic inventory items that are essential to production and also inexpensive should be ordered in small quantities only.
• D) A small percentage of the inventory items probably represents a large percentage of the inventory cost.
• E) One-third of a year's inventory need should be on hand, another third should be in the order process and the last third should not be ordered yet.

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Definitions:

Economic Sacrifices Approach

A method in accounting that focuses on recognizing and measuring the sacrifices or costs that a company incurs in the process of generating revenue.

Input Market

The market in which firms purchase raw materials, labor, services, and other inputs necessary for the production of goods or services.

Salvage Value

The estimated resale value of an asset at the end of its useful life.

Expected Benefit Approach

A method used in actuarial science and finance to calculate the anticipated benefits and corresponding costs or contributions to a pension plan over time.