Asked by Alexandra Ivars on May 09, 2024
Verified
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.
Reorder Point
The inventory level at which an order is triggered to replenish stock before it runs out.
Order Quantity
The amount of goods a company decides to purchase or produce in a single order.
Demand During Lead Time
The total quantity of a product that is expected to be sold or used during the time it takes to reorder and receive a shipment of the product.
- Gain an appreciation for the role and criticality of reordering thresholds in the domain of inventory management.
Verified Answer
AR
Analiz RiveraMay 12, 2024
Final Answer :
B
Explanation :
The inventory decision rule states that the order quantity is 100 gearboxes and the reorder point is 14 gearboxes. Therefore, option B is the correct choice as it matches with the given information. Option A and D are incorrect as the reorder point and safety stock are opposite concepts. Option C is not applicable to this statement. Option E is incorrect as the reorder point is explicitly mentioned in the statement as 14 gearboxes.
Learning Objectives
- Gain an appreciation for the role and criticality of reordering thresholds in the domain of inventory management.