Asked by Jaliyah Henderson on Jun 18, 2024
Verified
Cycle inventory exists in a supply chain because different stages exploit economies of scale to lower total cost.
Economies of Scale
Cost advantages obtained due to increased production scale, where the cost per unit of production decreases with larger volume.
Cycle Inventory
The inventory a company needs to meet its average sales demand between the arrival of stock replenishments.
Total Cost
The complete cost of production or providing a service, including fixed and variable costs.
- Achieve knowledge of the concept of cycle inventory and its value in harnessing economies of scale for lowering financial outlays.
Verified Answer
AC
Alsopher ChangJun 19, 2024
Final Answer :
True
Explanation :
Cycle inventory refers to the inventory that is held at different stages of the supply chain to balance the production and demand fluctuations. These inventory buffers are created to take advantage of economies of scale, reduce the costs associated with frequent production setup changes, and improve production efficiency. Therefore, cycle inventory exists in a supply chain because different stages exploit economies of scale to lower total cost.
Learning Objectives
- Achieve knowledge of the concept of cycle inventory and its value in harnessing economies of scale for lowering financial outlays.