Two fundamental inventory decisions are when to order and how much to order.Which of the following statement is true with respect to Fixed Quantity (FQS) and Fixed Period (FPS) inventory systems?
A)A FPS orders a fixed period quantity when the inventory position reaches or drops below the reorder point (r).
B)A FPS must cover a time period of T + L to cover the risk of a stock out.
C)A FPS places an order for the economic order quantity every T time units.
D)A 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), the order must cover the time period of the review period (T) plus the lead time (L) to ensure that there is enough inventory to avoid stockouts until the next order arrives.

Two Fundamental Inventory Decisions Are When to Order and How