RMG 301 Chapter Notes - Chapter 12: Economic Production Quantity, Opportunity Cost, Purchase Order

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Inventory management: an inventory or stock is an material, part or product sitting idle, not being used usually in a warehouse or stock room and kept for use or sale in the future. Inventory management is concerned with planning and controlling inventories. Importance of inventory: a typical company probably has approx. Inventory also influences the income (or earnings) statement through cost of goods sold (cogs). Inventory management has 2 main concerns: the level of customer service (item availability or fill rate) to have the right goods in sufficient quantities in the right place at the right time. Inventory costs the costs of ordering and holding inventories. Inventory turnover is the ratio of annual cost of goods sold (cogs) to average inventory investment. The inventory turnover ratio indicates how many times a year the inventory is sold or used. Generally, the higher the ratio the better, because that implies more efficient use of inventories.

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