Two Fundamental Inventory Decisions Are When to Order and How

question 71

Multiple Choice

Two fundamental inventory decisions are when to order and how much to order.Which of the following statement is true with respect to Fixed Quantity (FQS) and Fixed Period (FPS) inventory systems?

• A)A FPS orders a fixed period quantity when the inventory position reaches or drops below the reorder point (r).
• B)A FPS must cover a time period of T + L to cover the risk of a stock out.
• C)A FPS places an order for the economic order quantity every T time units.
• D)A 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:

Efficient Production

The process of producing goods or services in a way that minimizes waste and maximizes the utilization of resources.

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Edible tropical fruits provided by the coconut palm that are used in a variety of foods and beverages.

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Aquatic animals with gills and usually scales, living in freshwater or saltwater environments, commonly used as food.

Opportunity Cost

In decision-making, the loss incurred by not opting for the immediate next best alternative.