Question

A small automotive parts shop uses a continuous review system to restock cases of oil. At the start of the day they have 175 quarts. The reorder point is 200 and the order quantity is 48. They have 48 quarts scheduled to arrive in the next 2 days. A customer walks in and buys 35 quarts. Should they place another order? Yes or No

Answer 1

Answer:

Yes

Explanation:

A continuous review system means that inventory levels are always being checked. If that is the case, then the company should realize that after the customer bought the 35 quarts, that even after the scheduled 48 quarts arrive, they will still be under the reorder point (188 < 200) even if no additional sales occur:

$I = 175+48-35\\I=188\ quarts$

Therefore, they should place another order, the answer is Yes.