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) None of these is true.

Question

Quizplus · Accepted Answer

According to the inventory decision rule mentioned, the point at which an order should be placed is 14, which is the reorder point. The order quantity is 100, which will be ordered when the inventory level reaches the reorder point. Therefore, option B is the correct answer. The statement does not provide any information about demand during lead time or safety stock levels.

An Inventory Decision Rule States, "When the Inventory Level Goes