CPIM Practice Exam

What formula calculates the ending PAB after the demand time fence?

1. Prior period PAB - scheduled MPS receipt + forecast

2. Prior period PAB + scheduled MPS receipt - the greater of customer orders or forecast

3. Prior period PAB + customer orders - planned orders

4. Prior period PAB - forecast + customer orders

The correct answer is: Prior period PAB + scheduled MPS receipt - the greater of customer orders or forecast

The correct answer involves understanding how to calculate the ending Projected Available Balance (PAB) after the demand time fence. The ending PAB reflects the inventory position after accounting for various factors affecting it during a given period, particularly within the context of master production scheduling (MPS). The formula provided as the answer incorporates critical elements: the prior period's ending PAB, scheduled MPS receipts, and customer orders. Specifically, the formula begins with the prior period PAB and adds the scheduled MPS receipts, representing planned increases in inventory due to production. It then subtracts the greater of customer orders or forecast, which is essential for reflecting actual demand accurately. By using the greater of these two values, the formula accounts for the most rigorous demand, ensuring that the projected balance considers the highest level of commitment and forecast demand that may affect stock levels. Thus, option B effectively balances the inventory position by addressing both the anticipated inflows from scheduled receipts and the necessity to account for existing customer orders or the forecasted demand, whichever is greater, ensuring that it captures a more realistic inventory picture post-demand time fence. This careful consideration inherently leads to more accurate planning and decision-making in manufacturing and production environments.