Accounting Information Systems (13th Edition)
Accounting Information Systems (13th Edition)
13th Edition
ISBN: 9780133428537
Author: Marshall B. Romney, Paul J. Steinbart
Publisher: PEARSON
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Chapter 13, Problem 1CQ
To determine

Identify the inventory control methods that are most likely to be used for a product in which sales can be reliably forecasted.

Expert Solution & Answer
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Answer to Problem 1CQ

Option c.

Explanation of Solution

Identify the inventory control methods that are most likely to be used for a product in which sales can be reliably forecasted:

  1. a. The Just in inventory process (JIT) is mainly used for the products that strive hard to forecast demand. Moreover, Just in inventory process look for ways to minimize inventory (such as by making purchases only after sales). Hence, option “a” is an incorrect option.
  2. b. Economic order quantity is that level of order quantity which is optimum for an organization. At EOQ, the total inventory cost is low. It is that quantity of inventory that a company should hold to reduce its inventory holding cost and ordering cost. Hence, option “b” is an incorrect option.
  3. c. Under Material Resource Planning (MRP), the sales can be forecasted and with this information it can purchase inventory to meet the anticipated requirements. Hence, option “c” is the correct option.
  4. d. The approach of activity based costing keeps the record of resources usage by operating activities and cost incurred for such activities. Managers can take effective and right decision with the help of activity based costing. Hence, option “d” is an incorrect option.
Conclusion

Therefore, the correct option is option c.

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