A Company Currently Has No Items in Inventory

question 12

Multiple Choice

A company currently has no items in inventory. The demand for the next four months is 200, 400, 250, and 350 units. Assuming a level production rate of 250 units per month, determine the months in which backorders or stockouts will materialize.

• A) Only in month 1
• B) In months 2 and 4
• C) In months 2, 3, and 4
• D) In months 2 and 3

---

Definitions:

Net Earnings

The amount of profit that remains after all operating expenses, taxes, and interest are subtracted from total revenue.

Interest Rates

The percentage of a sum of money charged for its use, indicating the cost of borrowing money or the return on invested savings.

Inflation Rates

The pace at which overall prices for goods and services climb, diminishing the value of money.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.