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Hi,
I didn’t understand how the logic behind this question, so I am not able to work out the answer my myself. Could you kindly help me to understand it.
I have got the question on revision kitQuestion:
There are 27,500 units of Part Number x35 on order with the suppliers and 16,250 units outstanding on existing customers’ orders.
If the free inventory is 13,000 units, what is the physical inventory?A 1750
B 3250
C 24250
D 29250The correct answer is A
In the book the answer is explained as below
Free inventory balance = units in inventory + units on order from suppliers – units outstanding on customers’ orders
13000 = units in inventory +27500 -16250
Unit in inventory = 13000-27500+16250=1750Thank you
Gabbi
Suppose a customer rings you up and wants to order some units. You need to check where or not you will be able to supply them.
You will check how many there are in inventory at the moment (suppose for example, you have 1000 units in inventory). However, you will also check whether you are waiting for an order to arrive from suppliers (suppose you have 5000 on order).
So far it means that you will be able to deal with an order from the customer for 6,000 units.
However, suppose you also realise that you already have customers waiting, and they have ordered 2,000 units.
So….how many units are you able to promise to the new customer? You already have 1000. Another 5000 are going to arrive. But 2000 are already promised to another customer.
That means that you are able to promise 4000 to this new customer. This is what we call the free inventory.I hope that makes it clear to you. If it does, then the answer to your question should now make sense 🙂
Hi John,
Thank you very much, with your explanation I understood the question and of course the answer.
I really enjoy studying with OT, I will never stop to thank you for what you do.Gabbi
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