Management Notes

Reference Notes for Management

Q is to ________ systems as p is to ________ systems.

Q is to ________ systems as p is to ________ systems.


A. fixed quantity, fixed period
B. variable demand, constant demand
C. variable lead time, variable demand
D. variable quantity, variable period
E. quality, price

The Correct Answer Is:

A. fixed quantity, fixed period

In the context of inventory management, the Q-system and P-system are two widely recognized methods used to control and manage inventory levels. The Q-system is also known as the Economic Order Quantity (EOQ) model, while the P-system is referred to as the periodic review system.

It focuses on maintaining a constant, fixed quantity of inventory on hand, which is reordered whenever the inventory level drops to a certain threshold known as the reorder point.

The goal of the Q-system is to balance holding costs (costs associated with storing inventory) and ordering costs (costs associated with placing and receiving orders). By doing so, it minimizes the total cost associated with holding and replenishing inventory.

On the other hand, the P-system involves reviewing inventory levels at regular, fixed intervals (e.g., every week or month). When the review takes place, the order quantity is determined to bring the inventory level back up to a predefined level. The P-system is also known as the periodic order quantity model.

Now, let’s discuss why option A, “fixed quantity, fixed period,” is the correct answer:

A. Fixed Quantity, Fixed Period

This option correctly matches the Q-system with a fixed quantity (EOQ) and the P-system with a fixed period. In the Q-system, the quantity to be ordered remains constant, while in the P-system, the review or ordering period is fixed.

This alignment accurately represents the key characteristics of both systems, making it the correct choice.

Now, let’s go through the other options and explain why they are not correct:

B. Variable Demand, Constant Demand

This option is incorrect because it introduces the notion of demand variability, which is not the primary distinguishing factor between the Q-system (EOQ) and the P-system.

Both systems can be applied in situations with variable demand. The key difference lies in how they manage inventory levels, not in how they respond to demand fluctuations.

C. Variable Lead Time, Variable Demand

This option confuses the issue by introducing two unrelated concepts: lead time and demand variability. While lead time (the time it takes to receive an order after it’s placed) is an important factor in inventory management, it is not the defining characteristic that separates the Q-system from the P-system.

Similarly, variability in demand is not the primary factor distinguishing between these systems.

D. Variable Quantity, Variable Period

This option introduces variability in both quantity and review periods for both systems. However, this does not accurately capture the essential features that differentiate the Q-system (EOQ) from the P-system.

In reality, the Q-system is characterized by a fixed order quantity and variable reorder point, while the P-system employs a fixed review period and variable order quantity.

E. Quality, Price

This option is entirely unrelated to inventory management systems. It introduces concepts of quality and price, which are not relevant to distinguishing between the Q-system and the P-system.

The question specifically pertains to inventory management methods and does not involve considerations of product quality or pricing.

In essence, the correct answer, option A, “fixed quantity, fixed period,” accurately represents the key characteristics of the Q-system (EOQ) and the P-system. The Q-system maintains a constant order quantity and reorders when inventory reaches a predetermined level (fixed period).

While the P-system reviews inventory at regular intervals and orders a variable quantity to replenish stock. The incorrect options either introduce irrelevant concepts or fail to capture the distinguishing features of these inventory management systems.

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