CPIM Practice Exam

How are available inventories calculated in MRP?

1. Available Inventory = Net Requirements + Gross Requirements

2. Available Inventory = Gross Requirements - Net Requirements

3. Available Inventory = Gross Requirements + Planned Receipts

4. Available Inventory = Net Requirements - Planned Orders

The correct answer is: Available Inventory = Gross Requirements - Net Requirements

Available inventory in Material Requirements Planning (MRP) is determined by evaluating how much inventory is actually available for use after taking into account the demand placed on that inventory (net requirements) and any supply that is on hand or planned to arrive. The correct calculation of available inventory is found in the understanding that net requirements represent the demand that needs to be fulfilled after considering the inventory that is already available. Gross requirements, on the other hand, reflect total demand without considering what is on hand. Thus, available inventory can be thought of as what is currently available minus any obligations to fulfill demand. The formula that makes sense here is one where available inventory is concluded by reducing gross demands by what is already available or planned, leading to the result of net requirements being the key focus. This reflects the true state of inventory availability that can be used to meet the requirements. This understanding clarifies why gross requirements alone or receipts cannot simply be added without consideration of actual on-hand inventory. Therefore, the proper calculation recognizes net requirements as that which must be fulfilled, leading to the conclusion regarding available inventory.