An Inventory Decision Rule States "When the Inventory Level Goes

question 152

Multiple Choice

An inventory decision rule states "when the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is true?

• A) One hundred is the reorder point, and 14 is the order quantity.
• B) Fourteen is the reorder point, and 100 is the order quantity.
• C) The number 100 is a function of demand during lead time.
• D) Fourteen is the safety stock, and 100 is the reorder point.
• E) The re-order point cannot be determined from this statement.

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Definitions:

Units Transferred Out

In process costing, this refers to the finished units that are moved out of a production process to the next process or to finished goods inventory.

Processing Department

A division within a manufacturing facility where a specific stage of production is carried out.

Cost Per Equivalent Unit

A calculation used in process costing to allocate costs among units of production, considering units partially completed at the end of a period.

Equivalent Units

A concept used in process costing that converts partially completed units into a smaller number of fully completed units based on the percentage of completion.