Managing inventory turnover involves balancing which of the following consideration(s) in setting the optimum level of inventory and, thus, the rate of inventory turnover?
A)For a given amount of gross margin on the goods, firms prefer to sell as many goods as possible with a minimum of assets tied up in inventories.
B)An increase in the rate of inventory turnover between periods indicates reduced costs of financing the investment in inventory.
C)Management does not want to have so little inventory on hand that shortages result in lost sales.
D)Increases in the rate of inventory turnover caused by inventory shortages could signal a loss of customers.
E)All of the above.

Question

Quizplus · Accepted Answer

Managing inventory turnover involves balancing multiple considerations in setting an optimum level of inventory and the rate of inventory turnover. These considerations include: (A) maximizing gross margin by selling as many goods as possible with minimum assets tied up in inventory, (B) reducing financing costs associated with inventory investment by increasing inventory turnover rate, (C) avoiding lost sales due to inventory shortages, and (D) preventing loss of customers resulting from inventory shortages. Therefore, all of the choices listed are essential to managing inventory turnover effectively.

Managing Inventory Turnover Involves Balancing Which of the Following Consideration(s)