An Inventory Decision Rule States "When the Inventory Level Goes

question 152

Multiple Choice

An inventory decision rule states "when the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is true?

• A) One hundred is the reorder point, and 14 is the order quantity.
• B) Fourteen is the reorder point, and 100 is the order quantity.
• C) The number 100 is a function of demand during lead time.
• D) Fourteen is the safety stock, and 100 is the reorder point.
• E) The re-order point cannot be determined from this statement.

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Definitions:

Profit

The financial gain or return derived from an investment, transaction, or operation after subtracting all costs, expenses, and taxes.

Utilization

The extent to which an entity (e.g., equipment, workforce) is being used efficiently to produce goods or services.

Efficiency

The ratio of the output produced to the input resources used in the production process, indicating the effectiveness of resource utilization.

Effective Capacity

The maximum output rate or service capacity an operation, process, or facility can be expected to achieve under normal conditions.