For an Item Under Continuous Review, the On- Hand Inventory

question 25

Multiple Choice

For an item under continuous review, the on- hand inventory is only 20 units and the reorder point R is 100 units. There are no backorders, but there is one open order for 90 units. Which one of the following statements is TRUE?

• A) An order should be placed now for 20 units.
• B) An order should be placed now for 10 units.
• C) The current inventory position is 100 units.
• D) There is no need to order at the present time.

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Definitions:

Deferred Revenue

Money received by a company for goods or services yet to be delivered or performed; classified as a liability on the balance sheet until the transaction is completed.

Product Costs

All costs incurred to acquire or produce a product that is intended for sale, including materials, labor, and overhead.

Sales

The activities involved in selling goods or services to customers for money.

Administrative Expenses

Expenses related to the general operations of a business, such as salaries of executive personnel, accounting, and human resources.