Question

In: Accounting

You work for Johnson Brothers Baked Treats. You are responsible for managing ingredient inventory, including butter,...

You work for Johnson Brothers Baked Treats. You are responsible for managing ingredient inventory, including butter, milk, eggs, flour, and all the other materials that go into your company's baked products. Storing these materials can get expensive so you want to be efficient in your ordering, having just enough on hand at any given time without risking of running out. Which method of inventory control do you think will work best at Johnson Brothers?

a.

Have two days' worth of raw materials in stock, and only re-order when the current inventory has been used
b.

Stock as much raw material as you can to make sure that workers always have more than enough to work with
c.

Stock two weeks worth of raw materials to ensure workers have what they need plus a little more
d.

Stock as much raw material as you expect to use in the next three working days to ensure workers have just what they need; closely monitor the flow of incoming materials to ensure you always have three days' worth

Solutions

Expert Solution

Option (d) is correct. Stocking the raw material as expected to be used in the next three working days helps in having just enough on hand at any given time without risking of running out. This inventory control also monitor the flow of incoming materials to ensure you always have three days' worth.

Option (a) is incorrect. The inventory control of "Have two days' worth of raw materials in stock, and only re-order when the current inventory has been used" will not have just enough on hand at any given time as order will be done when the inventory has been used.

Option (b) is incorrect. Stocking as much raw material as you can to make sure that workers always have more than enough to work with is not a good inventory control as the items in the inventory are perishable goods and will get deteriorated.

Option (c) is incorrect. Stocking two weeks worth of raw materials to ensure workers have what they need plus a little more is also not a good inventory control as the ingredient inventory are perishable goods and will not stay long for two weeks.

ekkarill92 answered 2 years ago
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