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Chapter 4: Q. 20-3PE (page 554)

Model most appropriate when a fixed amount must be purchased each time an order is placed.

Short Answer

Expert verified

Fixed-order quantity model is the most appropriate when a fixed amount must be purchased each time an order is placed.

Step by step solution

01

Definition of Fixed-order quantity model

Fixed-order quantity modelinitiates an order when the event of reaching a specified reorder level occurs. This event may happen at any time, looking at the demand for the items considered.

02

Explanation

The model that is the most appropriate when a fixed amount must be purchased each time an order is placed is described as the Fixed-order quantity model. Fixed鈥搊rder quantity model is an inventory control model where the number requisitioned is fixed and therefore the actual ordering is triggered by inventory dropping to a specified level of inventory.

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Most popular questions from this chapter

Discuss the nature of the costs that affect inventory size. For example b. How does obsolescence contribute to the cost of carrying inventory? How can this cost be reduced?

Question: What category of forecasting techniques uses managerial judgment in lieu of numerical data?

The practice of allocating capacity and manipulating demand to make it more predictable.

What are the advantages and disadvantages of aggregating demand from a forecasting view? Are there other things that should be considered when going from multiple DC鈥檚 to one DC?

These are the six major components of demand?
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