A Shortage Occurs in a Replenishment Cycle

question 71

Multiple Choice

A shortage occurs in a replenishment cycle

• A)only if the demand during the lead time exceeds the ROP.
• B)only if the demand during the lead time is less than the ROP.
• C)only if the demand during the lead time exceeds the average demand.
• D)only if the demand during the lead time is less than the average demand.

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Definitions:

Machine-Hours

A measure of production volume or activity based on the number of hours machines are operated.

Markup

The amount added to the cost of a product to cover overhead and profit, expressed as a percentage of the cost.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, from maintenance to quality control.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead costs to products, calculated before the fiscal period begins based on estimated costs and activity levels.