The maximum inventory with backorders is
A)Q
B)Q - S
C)S
D)(Q - S) / 2

Question

Quizplus · Accepted Answer

The maximum inventory with backorders formula is Q-F*S/(F-S). Substituting the values given in option B, we get Q*(F1-S1)/(F1+F10-2S1), which is equivalent to Q/(1+(F10-S1)/(F1-S1)). Since the numerator (F10-S1) is greater than the denominator (F1-S1), the expression in the denominator is less than 1, making the maximum inventory with backorders occur at Q. Therefore, the best choice is B.

The Maximum Inventory with Backorders Is