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Business Arithmetic — Entrepreneurship STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceEntrepreneurshipBusiness Arithmetic3 Marks
Question
What factors should be kept in mind for ordering an inventory?
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Answer

Inventory means list of materials used in a business. An entrepreneur must be very careful and wise while deciding about the level of inventory. An entrepreneur must avoid overstocking and under-stocking of each item of the inventory.The factors that influence the decision on such orders are:
  1. Order lead time.
  2. Usage rate or rate of consumption.
  3. Reorder-point or minimum quantity of the item to be kept.
An entrepreneur must maintain the supply line in a proper manner so that at any time he may have adequate flexibility to change the process of production according to customer's requirement.

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