Using the Fixed-Time-Period Inventory Model, and Given an Average Daily

question 65

Multiple Choice

Using the fixed-time-period inventory model, and given an average daily demand of 200 units, 4 days between inventory reviews, 5 days for lead time, 120 units of inventory on hand, a z of 1.96, and a standard deviation of demand over the review and lead time of 3 units, which of the following is the order quantity?

• A) About 1,086
• B) About 1,686
• C) About 1,806
• D) About 2,206
• E) About 2,686

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Definitions:

Activity Base

A measure used as a basis for allocating costs in activity-based costing, relating costs to the activities that drive the need for those costs.

Revenue

The total amount of income generated by the sale of goods or services related to a company's main operations.

Investment Turnover

A ratio measuring the ability of a company to generate sales or revenue from its investments, usually indicating how efficiently the investments are used.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the benefit (return) of an investment by the cost of the investment.