COST ACCOUNTING
INVENTORY AND PRODUCTION MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Ensure that the material requested by operations is always available
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Anticipating surges in material needs and variations in process waiting times
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Prepare a stock of materials used for safety activities
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Determine the additional amount for high frequency material requirements
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Detailed explanation-1: -Safety stock is an extra quantity of a product which is stored in the warehouse to prevent an out-of-stock situation. It serves as insurance against fluctuations in demand.
Detailed explanation-2: -Anticipation Inventory vs Safety Stock The difference is that safety stock is held for unexpected events, and anticipation inventory – as the name entails – is held because you expect a run on your product at certain times.
Detailed explanation-3: -Safety stock is inventory, i.e., concerned with short-range variations in either demand or replenishment. It protects against the uncertainty of demand and lead time.
Detailed explanation-4: -The answer is to cater forecast error. Safety stocks are held to meet demand in the eventuality of demand forecast errors and/or supply delays or disruptions.