Among the advantages of cycle counting is that it
Options:
A. makes the annual physical inventory more acceptable to management.
B. does not require the detailed records necessary when annual physical inventory is used.
C. does not require highly trained people.
D. allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory.
E. does not need to be performed for less expensive items.
The Correct Answer Is:
D. allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory.
Correct Answer Explanation: D. allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory.
Cycle counting, as a method of inventory management, offers several advantages, making it an efficient and effective approach for businesses. The correct answer, D, is justified because cycle counting allows for the more rapid identification of errors and subsequent remedial action compared to annual physical inventory checks.
This approach involves regularly scheduled counts of a portion of the inventory throughout the year, ensuring that discrepancies or errors are caught sooner, leading to quicker corrective measures.
Cycle counting’s effectiveness lies in its ability to identify discrepancies promptly. When inventory is checked regularly in smaller, manageable portions, any errors or discrepancies are likely to be caught sooner rather than waiting for an annual physical inventory, which can uncover issues only at the end of the year.
By addressing these discrepancies promptly, businesses can take remedial actions swiftly, minimizing the impact on operations and financials. For instance, if there’s a miscount or a discrepancy in the recorded inventory levels, cycle counting allows for immediate investigation and correction, preventing further errors or operational disruptions.
Now, let’s delve into why the other options are not the correct choice:
A. “Makes the annual physical inventory more acceptable to management.”
This option suggests that cycle counting somehow enhances the acceptability of annual physical inventory to management. However, cycle counting and annual physical inventory serve different purposes.
While cycle counting involves regular, smaller-scale checks, annual physical inventory is a comprehensive check done once a year. Cycle counting does not inherently affect the perception or acceptability of annual physical inventory.
B. “Does not require the detailed records necessary when annual physical inventory is used.”
Contrary to this option, cycle counting does require meticulous record-keeping. Although the records might not be as extensive as those needed for an annual physical inventory, accuracy in tracking inventory levels is crucial for cycle counting to effectively identify discrepancies.
Detailed records are necessary to ensure that the cycle counts are accurate and representative of the entire inventory.
C. “Does not require highly trained people.”
While cycle counting may not necessitate highly specialized training compared to some other inventory management methods, it still requires competent individuals who understand inventory processes, counting methods, and accuracy in recording data.
Adequate training and understanding of inventory procedures are essential for reliable cycle counting.
E. “Does not need to be performed for less expensive items.”
Cycle counting’s effectiveness is not determined by the value of items in the inventory. Regardless of the item’s cost, cycle counting can be applied to maintain accurate inventory levels.
In fact, for businesses dealing with a wide range of items, including less expensive ones, cycle counting becomes even more crucial to maintain accuracy across the inventory spectrum.
In summary, while cycle counting offers various advantages in inventory management, such as the rapid identification of errors for timely remedial action, the other options presented do not accurately capture the essence of cycle counting or its benefits, making option D the correct choice.
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