Question 1
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?
◦ The number 100 is a function of demand during lead time.
◦ One hundred is the reorder point, and 14 is the order quantity.
◦ Fourteen is the safety stock, and 100 is the reorder point.
◦ The re-order point cannot be determined from this statement.
◦ Fourteen is the reorder point, and 100 is the order quantity.
Question 2
Which of the following statements regarding the production order quantity model is
true?
◦ It applies only to items produced in the firm's own production departments.
◦ It relaxes the assumption that the demand rate is constant.
◦ It minimizes the total production costs.
◦ It relaxes the assumption that all the order quantity is received at one time.
◦ It minimizes inventory.
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