What Is a Drawback of a Just-In-Time System

question 19

Multiple Choice

What is a drawback of a just-in-time system?

• A) Transport costs are high when using a just-in-time system.
• B) It leaves a firm without a buffer stock of inventory.
• C) It increases the warranty costs associated with products.
• D) It leaves a firm with high scrap costs associated with defective products.

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Definitions:

First-In, First-Out

An inventory valuation method where the oldest items are sold or used first.

Cost of Goods Sold

An accounting term that refers to the direct expenses related to the production of goods sold by a business, including materials and labor.

Beginning Inventory

The value of all inventory held by a company at the start of an accounting period.

Net Income

The conclusive financial gain of a company post all deductions for expenses and taxes from the revenue.