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Demand for raw materials is derived from demand, calculated exactly once a firm has the MPS. therefore, items contained in manufacturing inventories are called dependent demand inventory. - True
Dependent demand inventory consists of raw materials and other items used in a business's production process. The demand for these items is derived from the demand for the finished products that are produced using those materials. Thus, the demand for dependent demand inventory is determined by the demand for the products that are made using those materials.
What products are produced when is determined by the Master Production Schedule (MPS). Thus, once a corporation has the MPS, the demand for raw materials can be precisely estimated from the demand for finished goods. So-called dependent demand inventory refers to the items in production inventories.
Read more about dependent demand inventory on:
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