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Chapter 4: Q. 20-2DQ (page 543)

Distinguish between in-process inventory, safety stock inventory, and seasonal inventory.

Short Answer

Expert verified

Inventory is required for the ongoing process and must be kept at a level that does not interfere with production. Stockpile inventory stored for emergencies or as a buffer against an unexpected rise in demand. Inventory that is only required for one season and is then sold or kept off-site.

Step by step solution

01

Distinguish between in-process inventory, safety stock inventory, and seasonal inventory

Basis of comparison

In-process inventory

Safety stock inventory

Seasonal inventory

Meaning

Work-in-process inventory is a company's unfinished items that are waiting to be completed and sold. The traditional definition of work in progress inventory includes all raw materials, overhead expenses, and labor-related with each stage of the manufacturing process.

Safety stock is extra inventory kept by a company to ensure that it does not run out of a specific product. Most businesses have it in place to assist them to maintain everyday operations based on the product's requirement and demand.

Seasonal inventory is inventory that has been in storage for more than four months after the season has ended. Licensees will have four months from the conclusion of a season to sell the inventory from that season.

Consumption

Inventory that the company is producing, but has not completed all phases of the production and is not ready for the final consumption.

Safety stock inventory means the inventory that the organization kept in its hands for emergency purposes when constraint exceeds supply.

These are those inventories that the organization kept for the special occasion or seasons.

02

In-process inventory, safety stock inventory, and seasonal inventory

a) In-process inventory

Work-in-processinventory is a company's unfinished items that are waiting to be completed and sold. The traditional definition of work in progress inventory includes all raw materials, overhead expenses, and labor-related with each stage of the manufacturing process.

b) Safety stock inventory

Safety stock is an extra inventory kept by a company to ensure that it does not run out of a specific product. Most businesses have it in place to assist them to maintain everyday operations based on the product's requirement and demand.

c) Seasonal inventory

Seasonal inventory is an inventory that has been in storage for more than four months after the season has ended. Licensees will have four months from the conclusion of a season to sell the inventory from that season.

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