5.6 Bm quiz 2

Just-in-case (JIC) stock control reduces the costs of wastage and reduces the costs of storage.

• True

• False

Answer explanation

Just-in-case (JIC) stock control involves holding extra inventory to prevent stockouts, which can increase storage costs and wastage, making the statement false.

The just-in-time (JIT) stock control system avoids the use of holding stocks (inventory) as these are supplied and delivered only when needed for production.

• True

• False

Answer explanation

The just-in-time (JIT) stock control system indeed avoids holding stocks by ensuring that materials are delivered only when needed for production, making the statement true.

Capacity utilization measures the extent to which a firm is operating at its maximum potential level.

• True

• False

Answer explanation

True. Capacity utilization indicates how much a firm is using its potential output capacity. A higher percentage means the firm is closer to its maximum potential level of production.

Stocks consisting of component parts used in the production process are called raw materials.

• True

• False

Answer explanation

The statement is false because stocks of component parts used in production are typically referred to as 'components' or 'intermediate goods,' not raw materials, which are unprocessed resources.

Buffer stocks are back-up stocks that can consist of raw materials, semi-finished goods and finished goods.

• True

• False

Answer explanation

The statement is true because buffer stocks can indeed include raw materials, semi-finished goods, and finished goods, serving as a reserve to manage supply and demand fluctuations.

Labour productivity is a measure of the efficiency of workers in an organization; the more efficient they are, the higher the labour productivity.

• True

• False

Answer explanation

True. Labour productivity measures how efficiently workers perform their tasks. Higher efficiency leads to increased output per worker, thus indicating higher labour productivity.

There are three types of inventory: raw materials (natural resources), semi-finished goods (work-in-progress) and finished goods (completed products ready to be sold to consumers).

• True

• False

Answer explanation

The statement is true as it accurately describes the three types of inventory: raw materials, semi-finished goods, and finished goods, which are essential categories in inventory management.

The formula for calculating capacity utilization is: (Actual output ÷ Productive capacity) × 100 is true.

• True

• False

Answer explanation

The formula for capacity utilization is correctly stated as (Actual output ÷ Productive capacity) × 100. Therefore, the statement is true.

In a make-or-buy decision, managers calculate the costs of producing the product compared to the cost of buying the product from a supplier instead.

• True

• False

Answer explanation

True. In a make-or-buy decision, managers indeed compare the costs of producing a product in-house versus purchasing it from a supplier to determine the most cost-effective option.

Stock-take happens when a business runs out of inventory for production or sale.

• True

• False

Answer explanation

Stock-take refers to the process of counting and recording inventory levels, not just when a business runs out of inventory. Therefore, the statement is false.