Question

Which one of the following characteristics would likely be associated with a just-in-time inventory method?
a.Minimal finished goods inventory on hand.
b.A backlog of inventory orders not yet shipped..
c.An understanding with customers that they may come to the showroom and select from inventory on hand.
d.Ending inventory of work in process that would allow several production runs.

Answer 1

Answer:

a.Minimal finished goods inventory on hand

Explanation:

In just-in-time (JIT) production system, goods are manufactured to meet an accurately forecast demand. A company implementing JIT will, therefore, hold a low level of inventory and minimal finished products.  JIT aims at reducing wastage and increasing efficiency by purchasing raw materials only when they are required.

JIT seeks to align production activities with customer orders. Actual demand determines the output level. Management avails raw materials at the start of the production process. The overheads costs of managing inventory are thereby significantly reduced.

JIT relies on management ability to accurately forest demand. The business has to partner with fast and reliable suppliers for the strategy to be a success.