Which one of the following statements about anticipation inventory is TRUE?
A) It is a portion of inventory that is reserved for the best customer.
B) It is a portion of inventory that is used to absorb only the variation in demand.
C) It is a portion of inventory that is used to absorb only the variation in supply.
D) It is a portion of inventory that is used to absorb variation in demand or supply.

Question

Quizplus · Accepted Answer

Anticipation inventory is kept to absorb the variation in demand or supply. This helps in meeting the customer demand during times when demand exceeds supply or when supply exceeds demand. It is also used for seasonal inventory buildup. Therefore, option D is correct. Option A is incorrect because reserving inventory for one particular customer is not anticipation inventory. Option B and C are also incorrect because anticipation inventory can be used to absorb variation in both demand and supply.

Which One of the Following Statements About Anticipation Inventory Is