Consider the following conditions for an item used in the Hess Company's manufacturing process: Which of the following statements best describes Hess's situation regarding inventory replenishment?
A)No action is required,since a scheduled receipt is due to be delivered to Hess.
B)To cover its backorders,Hess should order two lots of 50 units.
C)Because it is incurring backorders,Hess should increase its reorder point.
D)Hess should place an order for 50 units,since the inventory position is less than the reorder point.

Question

Consider the following conditions for an item used in the Hess Company's manufacturing process:  Which of the following statements best describes Hess's situation regarding inventory replenishment?
A)No action is required,since a scheduled receipt is due to be delivered to Hess. 
B)To cover its backorders,Hess should order two lots of 50 units. 
C)Because it is incurring backorders,Hess should increase its reorder point. 
D)Hess should place an order for 50 units,since the inventory position is less than the reorder point.

Quizplus · Accepted Answer

The inventory position (on-hand + on-order - backorders) is currently below the reorder point, so Hess should place an order for 50 units to bring inventory back up to the desired level. No information is given to suggest a scheduled receipt is imminent, and ordering two lots of 50 units would exceed the reorder point and potentially lead to overstocking. Increasing the reorder point may be necessary if backorders continue to occur, but it is not a solution to the immediate inventory shortage.

Consider the Following Conditions for an Item Used in the Hess