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If a firm uses a just-in-time inventory system, what effect is that likely to have on the number and location of suppliers?

Short Answer

Expert verified

The just-in-time system requires that there are few suppliers who are closely located.

Step by step solution

01

Meaning of just in time inventory system

The just-in-time inventory system refers to an inventory system where the organization receives goods as and when required. This system helps an organization in avoiding storage costs of inventory.

02

The number and location of suppliers in a just-in-time inventory system

In the just-in-time inventory system, the organization has a few suppliers and they are located close to the factory. This is a requirement to ensure that the organization can easily get the inventory at the time of usage.

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Most popular questions from this chapter

Explain why the bad debt percentage or any other similar credit-control percentage is not the ultimate measure of success in the management of accounts receivable. What is the key consideration?

Biochemical Corp. requires $550,000 in financing over the next three years. The firm can borrow the funds for three years at 10.60 percent interest per year. The CEO decides to do a forecast and predicts that if she utilizes short-term financing instead, she will pay 8.75 percent interest in the first year, 13.25 percent interest in the second year, and 10.15 percent interest in the third year. Determine the total interest cost under each plan. Which plan is less costly?

Antonio Banderos & Scarves make headwear that is very popular in the fall-winter season. Units sold are anticipated as follows:

October

1,250

November

2,250

December

4,500

January

3,500

Total units

11,500

If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory build-up.

However, Antonio decides to go with level production to avoid being out of merchandise. He will produce the 11,500 items over four months at a level of 2,875 per month.

a. What is the ending inventory at the end of each month? Compare the units sales to the units produced and keep a running total.

b. If the inventory costs $8 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 1 percent or the monthly rate.)

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Why would a financial manager want to slow down disbursements?

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