Question

Match each scenario with the type of inventory system.

- Peter Company recognizes the cost of goods sold each time it recognizes a sale.
- Sherman Company recognizes the cost of goods sold after completing a sale.
- Physical inventory.
Match each scenario with the corresponding type of inventory system. Rate your confidence about the concept.

Options:
(a) Just-In-Time (JIT) inventory system
(b) Periodic inventory system
(c) Perpetual inventory system
(d) Economic Order Quantity (EOQ) model

Answer 1

The scenario presented does not match the Economic Order Quantity (EOQ) model, but the EOQ is a tool in inventory management used to find the optimal order quantity to minimize total inventory costs.

Step-by-step explanation:

The scenario you've presented does not directly relate to the Economic Order Quantity (EOQ) model. Instead, it describes an economist developing a predictive model for the stock market. However, I can give you a brief explanation of the EOQ model, which is useful in business inventory management.

The EOQ model is a formula used to determine the optimal order quantity that a company should purchase to minimize its costs related to ordering, receiving, and holding inventory. It is particularly beneficial in finding the most cost-effective quantity to order that minimizes total inventory costs.

The EOQ takes into account various factors such as demand rate, ordering costs, and carrying costs. By calculating the EOQ, businesses aim to find the balance point where the combination of inventory carrying costs and order costs are the lowest possible.