A disadvantage of the fixed-period inventory system is that:

(A) it involves higher ordering costs than the fixed quantity inventory system.

(B) since there is no count of inventory during the review period, a stockout is possible.

(C) additional inventory records are required.

(D) orders usually are for larger quantities. the average inventory level is decreased.

Question

Stanley Reese

Business

15 December, 03:14

A disadvantage of the fixed-period inventory system is that:

(A) it involves higher ordering costs than the fixed quantity inventory system.

(B) since there is no count of inventory during the review period, a stockout is possible.

(C) additional inventory records are required.

(D) orders usually are for larger quantities. the average inventory level is decreased.

+5

Answers (1)

Know the Answer?

Jade Olsen · Answer 1

The correct answer is letter "B": since there is no count of inventory during the review period, a stockout is possible.

Explanation:

The fixed-period inventory system, also known as a periodic inventory system, only updates the organization's inventory balance when an actual physical count of the inventory is necessary. Most companies only carry out a physical inventory count once every quarter or year, being this the reason why this system is called "fixed-period". However, this could lead to a company stockout at an unexpected period when the count was not carried out yet.