Which of the following statements about lot-sizing rules for MRP is TRUE?
A) The periodic order quantity (POQ) rule generates a higher level of average inventory, because it creates inventory remnants.
B) FOQ reduces the amount of inventory on hand, by doing a better job of matching the order quantity the projected on-hand inventory quantity.
C) The lot-for-lot rule minimizes inventory investment, but maximizes the number of orders placed.
D) In general, the fixed order quantity rule introduces greater instability into the production process.

Question

Quizplus · Accepted Answer

The lot-for-lot rule minimizes inventory investment, but maximizes the number of orders placed. The periodic order quantity (POQ) rule generates a higher level of average inventory, because it creates inventory remnants. FOQ and fixed order quantity rule both tend to increase the level of inventory on hand, and stability in production depends on the actual usage of the item. Thus, the statement in option B is incorrect, and the statement in option D is not necessarily true in all cases.

Which of the Following Statements About Lot-Sizing Rules for MRP