What should have been the initial inventory in units of demand, if the production requirement in units of product is 900, demand forecast is 1,000, and the necessary safety stock is 20 percent of the demand forecast?
A) 300
B) 500
C) 100
D) 1,900
E) Cannot find it

Question

Quizplus · Accepted Answer

The initial inventory in units of demand should be 500 units. This is because the demand forecast is 1,000 units, and the necessary safety stock is 20 percent of the demand forecast, or 200 units. Therefore, the initial inventory should be 1,000 units + 200 units = 1,200 units. However, the production requirement is only 900 units, so the initial inventory in units of demand should be 1,200 units - 900 units = 300 units.

What Should Have Been the Initial Inventory in Units of Demand