The ABC Approach to Inventory Management Is Based on the Concept

question 52

Multiple Choice

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

• A) inventory should arrive at the time it is needed in the manufacturing process.
• 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 inventory items represents a large percentage of inventory cost.
• E) one-third of a year's inventory needs should be on hand, another third should be on order, and the last third should be unordered.

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Definitions:

Performance Evaluation

The systematic process of assessing and reviewing an employee’s job performance and productivity in relation to established criteria and objectives.

Excess Capacity

The situation in which a company can produce more goods or services than currently demanded due to available resources exceeding production requirements.

Outside Supplier

An external entity that provides goods or services to a business, often used in the context of manufacturing or production.

Investment Center

A division or unit of a business that is responsible for its own revenues, expenses, and investments, and is evaluated based on its return on investment.