A company currently has no items in inventory. The demand for the next four months is 200, 400, 250, and 350 units. Determine the level production rate if a level strategy is selected with the goal of ending Period 4 with 100 units in inventory.
A) 300
B) 325
C) 450
D) 350

Question

Quizplus · Accepted Answer

To calculate the level production rate, we can use the formula:

Level production rate = (Total demand for the period – Desired ending inventory) / Number of periods

Total demand for the period = 200 + 400 + 250 + 350 = 1200

Desired ending inventory = 100 units

Number of periods = 4

Level production rate = (1200 – 100) / 4 = 275

Therefore, the best choice is B, as it is closest to the calculated level production rate of 275.

A Company Currently Has No Items in Inventory