Two fundamental inventory decisions are: when to order and how much to order. Which of the following statement is TRUE about fixed-quantity (FQS) and fixed-period (FPS) inventory systems?
A) An FPS orders a fixed-period quantity when the inventory position reaches or passes the reorder point (r).
B) An FPS must cover a time period of T + L to cover the risk of a stockout.
C) An FPS places an order for an economic order quantity (EOQ) on a continuous basis.
D) An FQS places an order to replenish the inventory position up to a target level (M) when the inventory position reaches the reorder point (r).

Question

Quizplus · Accepted Answer

In a fixed-period system (FPS), orders are placed at regular intervals, and the order quantity must cover the demand during the lead time (L) plus the review period (T) to avoid stockouts.

Two Fundamental Inventory Decisions Are: When to Order and How