If the Lead Time Is 1 Week, the Review Period

question 16

Multiple Choice

If the lead time is 1 week, the review period 4 weeks, the average demand 100 units per week and the safety stock is 50 units, the target level will be:

• A) 150 units
• B) 200 units
• C) 250 units
• D) 300 units
• E) 550 units

---

Definitions:

Contribution Margin

The amount by which sales income exceeds variable expenses, which is utilized to pay off fixed expenses and create profit.

Variable Costs

Expenses that vary in direct proportion to changes in production or sales volume, such as raw materials and direct labor costs.

Sales

Revenue generated from goods or services exchanged by an entity during its normal business operations.

Break-even Analysis

An assessment to determine the sales volume at which total revenues equal total costs, indicating no net loss or gain.