Question

Consider the following conditions for an item used in the Hess Company's manufacturing process:

On-hand inventory: 40 units
Open orders (scheduled receipts): 100 units
Backorders: 60 units

Required:
What is Hess's inventory position for this item?

Answer 1

Answer: 80 units.

Step-by-step explanation:

Hess's inventory position for this item refers to how much inventory is on order in addition to how much inventory has been ordered. There will usually be backorders and those will need to be accounted for as well.

The Inventory Position for this item can be calculated with;

Inventory Position = Open order ( scheduled receipts) + On hand inventory - Back-orders

Inventory Position = 100 + 40 - 60

Inventory Position = 80 units.