A disadvantage of the fixed-period inventory system is that
A) it involves higher ordering costs than the fixed quantity inventory system.
B) additional inventory records are required.
C) the average inventory level is decreased.
D) since there is no count of inventory during the review period, a stockout is possible.
E) orders usually are for larger quantities.
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The Correct Answer for the given question is Option D) since there is no count of inventory during the review period, a stockout is possible.
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Fixed-Period Inventory System
An inventory system that is known as a periodic inventory system is the fixed period inventory system. When you perform a physical inventory count of your company’s inventory, you update the inventory balance only. It takes time to conduct a physical inventory count, even if you don’t sell a wide range of products. When your company sells a large variety of products and larger quantities, counting becomes more difficult. For this reason, physical inventories are generally only counted once a quarter or once a year, hence the term “fixed period” or “periodic.”
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