Question

A manager is concerned that there isn’t enough time spent on production and too much time spent on setups. The manager decides to double all production batch sizes. This change has no impact on demand. What impact will this likely have on the average inventory in the process?.

Answer 1

The impact to likely have on the average inventory in the process is "because larger batches take longer to complete, average inventory will rise."

What is average inventory?

An estimation of the worth or quantity of a certain commodity or group of goods over two or more prescribed time periods is known as average inventory.

Some key features of average inventory are-

• By combining the beginning and final inventory values throughout a specific time period, average inventory is indeed the arithmetic mean of inventory during that time frame, which may differ from the average price for the same data set.
• The median price for the same set of data may differ from the average inventory, which is the sample mean of a stock during a specific time period.
• When examining overall sales volume, average inventory statistics can be used as a benchmark, enabling a company to monitor inventory losses.
• A business can keep inventory from the most recent purchase by using moving average inventory.
• Because it enables them to more effectively manage its costs, sales, or business connections, inventory administration is an important success factor for businesses.

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