Management Wishes to Use a POQ Lot-Sizing Rule for an Item

question 60

Multiple Choice

Management wishes to use a POQ lot-sizing rule for an item that experiences an average demand of 30 units per week. If the desired average lot size is 120 units, what should P be?

• A) zero or one week
• B) two or three weeks
• C) four or five weeks
• D) more than five weeks

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Definitions:

Industry Average

A benchmark or standard performance metric across a sector or industry, useful for comparison and strategic planning.

LIFO

Last In, First Out is a method for valuing inventory that records the most recently manufactured goods as the first ones sold.

Periodic Inventory System

An inventory accounting system where updates to inventory levels are made on a periodic basis, not continuously, through physical counts.

Ending Inventory Cost

The total value of all goods available for sale at the end of an accounting period, calculated using a specific inventory costing method like FIFO or LIFO.