Question

1) Which of the following is a function of inventory? A) To decouple various parts of the production process B) To provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand C) To take advantage of quantity discounts D) To hedge against inflation E) All of the above are functions of inventory.

Answer 1

Answer:

E) All of the above are functions of inventory.

Explanation:

Inventory refers to the finished goods used to satisfy customer's wants and needs or the materials used in the production process. Inventory is found in the warehouses or stores of manufacturing firms. Inventory belongs to the manufacturing company and is classified as assets.

The primary function of inventory is to provide production departments with a continuous supply of raw materials. In achieving this objective, the firm enjoys quantity discounts should it purchase materials in large quantities. Inventory safeguards a firm against price fluctuation of raw materials, which enables it to operate within budgets. A firm should be careful not to hold too much inventory as it is expensive or too little to run in stock-outs.