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Flashcards in Chapter 12 Deck (11)
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1

inventory management

the objective of inventory management is to strike a balance between inventory investment and customer service

2

functions of inventory (4)



1. separate various parts of the production process
2. to separate the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers
3. to take advantage of quantity discounts
4. to protect against inflation

3

types of inventory

raw material, work-in-process, maintenance/repair, finished goods

4

cycle counting advantages

1. eliminates shutdowns and interruptions
2. eliminates annual inventory adjustment
3. trained personnel audit inventory accuracy
4. allows causes of errors to be identified and corrected
5. maintains accurate inventory records

5

number of items counted daily formula

# of items counted/ day = quantity / n working days

6

independent demand:

demand for item is independent of the demand for any other item in inventory

7

dependent demand:

demand for item is dependent upon the demand for some other item in the inventory

8

holding costs

the costs of holding inventory over time

9

ordering costs

the costs of placing an order and receiving goods

10

setup costs

cost to prepare a machine or process for manufacturing an order

11

types of costs (3)

holding, ordering, setup