Question

1. Which of the following affects the calculation of the reorder point? a. Average usage b. Average lead time c. Safety stock d. All of the above 2. The role of safety stock in an organization is to a. Reduce the lead-time for an order to be received. b. Reduce the likelihood of a stockout. c. Reduce the reorder point. d. Decrease the economic order quantity. 3. The costs of preparing, issuing, and paying purchase orders, plus receiving and inspecting the items included in purchase orders is Purchasing costs. b. Ordering costs. Stockout costs. d. Carrying costs. 4. The costs associated with storing inventory such as insurance, breakage, materials handling. etc. are examples of which cost category? a. Purchasing costs. b. Ordering costs. c. Stockout costs. d. Carrying costs.

Answer 1

1)	The correct option is D = All of the above
	Reorder point is the inventory level point at which an entity makes a purchase order
	for inventory.
	Reorder point affected by average usage, lead time, safety stock.
	Any variable changes would lead to a change in the reorder level.
2)	The correct option is b= Reduce the likelihood of stockout.
	The safety sock maintained by the entity to safeguard to stock shortage
	and avoid breakdown of the entity's operation due to stock shortage.
3)	The correct option is b= ordering cost.
	Ordering costs include expenses to make a purchase order of inventory.
4)	The correct option is d= carrying costs.
	The carrying cost includes the cost related to the maintenance of the inventory.