A firm uses the extended economic order quantity approach to inventory management.Which one of the following inventory levels is considered to be the minimum inventory level given this approach?
A)safety stock plus the reorder quantity
B)50 per cent of the reorder quantity
C)zero inventory
D)safety stock level
E)reorder point level

Question

Quizplus · Accepted Answer

According to the extended economic order quantity approach, the minimum inventory level is the safety stock level. This is the amount of inventory that is held in order to prevent stockouts in case of unexpected demand or lead time variations. The safety stock level is calculated based on the desired service level and the variability of demand and lead time.

A Firm Uses the Extended Economic Order Quantity Approach to Inventory