Inventory Management & Control Flashcards

A company's annual demand is 12,000 units, ordering cost is $150 per order, and holding cost is $3 per unit per year. What is the Economic Order Quantity (EOQ)?

Answer: 1,000 units

EOQ = √(2 × 12,000 × 150 / 3) = √1,200,000 = 1,000 units.

Which inventory control technique uses barcode or RFID scanning after each transaction to maintain a running balance?

Answer: Perpetual inventory system

A perpetual inventory system continuously updates records after every receipt, shipment, or adjustment in real time.

What is 'obsolete inventory' in a warehouse context?

Answer: Stock that is no longer sellable due to expiration, discontinuation, or technological change

Obsolete inventory refers to items that can no longer be sold or used due to expiration, product discontinuation, or market changes.

The two-bin replenishment system triggers a reorder when:

Answer: The first bin is emptied and work begins on the second bin

In a two-bin system, emptying the first bin signals replenishment while the second bin covers demand during lead time.

Which costing method results in the same unit cost for all identical items regardless of when they were purchased?

Answer: Weighted Average Cost

Weighted Average Cost calculates one blended cost per unit by dividing total inventory cost by total units available.

In inventory management, 'days on hand' (DOH) is calculated as:

Answer: Average inventory ÷ daily COGS

Days on hand = (average inventory ÷ COGS) × 365, indicating how many days current stock will last.

Which type of inventory count focuses on high-value or high-movement items and counts them more frequently than low-value items?

Answer: Cycle counting

Cycle counting divides inventory into segments and counts each segment on a rotating schedule, with A items counted most frequently.