• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

PQ Awards Nominations

Please help us to win one of the PQ Magazine awards and send in the voting form >>
You can nominate us in any or all of the following categories: Online College of the Year, Study Resource of the Year, Private Sector Lecturer of the Year, and Accountancy Personality of the Year.

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Just in time

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Just in time

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • August 14, 2021 at 5:50 pm #631579
    sonalidb
    Member
    • Topics: 10
    • Replies: 8
    • ☆

    Hi, Does just in time imply low reorder costs? If so, why?

    I came across 2 different MCQ’s regarding JIT and both of them have contradicting answers

    The following statements refer to different types of inventory control systems and
    procedures.
    1 A just?in time system implies relatively low reorder costs.
    2 Periodic review means ordering inventory when it falls below the designated
    safety inventory level.
    3 Use of the economic order quantity model means that holding and ordering
    costs should be the same.
    Which of the above statements is/are correct?
    A 1 only
    B 1 and 3 only
    C 2 and 3 only
    D 1, 2 and 3

    The correct answer: B (This answer is given in Kaplan the question is Green Co for ref)
    With deliveries being made on a daily (or more frequent) basis, ordering costs need
    to be low compared to the benefits of holding inventory. Under the EOQ model,
    holding costs and ordering costs are balanced off, with the EOQ being at the point
    where these are equal to each other.
    Periodic review means ordering inventory at a fixed and regular time interval.
    Inventory levels are reviewed at a fixed time. The inventory in hand is then made up
    to a predetermined level.
    Statements (1) and (3) are correct.

    The other question says:
    Which TWO of the following are aims of a Just in Time system of inventory control?
    A Reduction in capital tied up in inventory
    B Creation of an inflexible production process
    C Elimination of all activities performed that do not add value
    D Lowering of inventory ordering costs

    The correct answer: A and C
    The system aims to create a flexible production process that is responsive to the customer’s
    requirements, not an inflexible process (B). With a Just in Time system, although inventory
    holding costs are close to zero, inventory ordering costs are high, not low as more frequent
    small deliveries of supplies will be needed (D).

    I don’t understand how JIT implies to relatively lower reordering costs if it said holding cost I would have agreed

    August 14, 2021 at 5:53 pm #631580
    sonalidb
    Member
    • Topics: 10
    • Replies: 8
    • ☆

    The only reason that I think it IMPLIES low reordering cost is that the company needs to get some leverage by using JIT system they will want to do so only when cost of reordering < cost of holding the inventory is my explanation right?

    August 15, 2021 at 11:53 am #631628
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51585
    • ☆☆☆☆☆

    A just in time system will require more frequent orders. This is only going to be cost effective if the reorder cost each time is low.

  • Author
    Posts
Viewing 3 posts - 1 through 3 (of 3 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • afital12 on FA Chapter 2 Questions The Statement of Financial Position and Statement of Profit or Loss
  • afital12 on FA Chapter 2 Questions The Statement of Financial Position and Statement of Profit or Loss
  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • John Moffat on Activity Based Costing part 1 – ACCA Performance Management (PM)
  • John Moffat on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy