Two Fundamental Inventory Decisions Are: When to Order and How

question 23

Multiple Choice

Two fundamental inventory decisions are: when to order and how much to order. Which of the following statement is TRUE about fixed-quantity (FQS) and fixed-period (FPS) inventory systems?

• A) An FPS orders a fixed-period quantity when the inventory position reaches or passes the reorder point (r).
• B) An FPS must cover a time period of T + L to cover the risk of a stockout.
• C) An FPS places an order for an economic order quantity (EOQ) on a continuous basis.
• D) An FQS places an order to replenish the inventory position up to a target level (M) when the inventory position reaches the reorder point (r).

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Definitions:

Vocational School

An educational institution designed to provide vocational education, or technical skills required to perform the tasks of a particular and specific job.

Clerk

An employee who performs clerical work such as keeping records, filing, and other administrative tasks.

Prestigious Name

A name that carries high status or respect, often associated with excellence in a particular field.

Normal Model

A statistical distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence.