Question

Which of the following is NOT a function of inventory? O A. To minimize disruptions in the production process OB. To provide selection of goods for anticipated customer demand O C. To increase total invested capital O D. To leverage discounts for buying in bulk Concept Question 5.5 A firm's probability of a stockout for a popular item is 2%. Given this information, what is its service level for this popular item? O A. 2% OB. 98% OC. 4% O D. 96%

Answer 1

Answer:

1.  C. To increase total invested capital

2. B. 98%

Explanation:

(1). An organization monitors its inventory to ensure it has enough quantity of raw materials, so the production process is not disrupted.

Also when an organization purchases inventory in bulk, it gets a discount on the purchase price.

An organization also manages its inventory to ensure it has a range of goods available in anticipation of customers' demands.

Inventory does NOT increase the total amount of capital invested.

(2). Probability (risk) of stockout = 2% = 0.02

Service level = 1 - stockout risk

Service level = 1 - 0.02 = 0.98 = 98%