Open to Buy Method involves...

Open to Buy Method involves...

• A. A fixed reorder point method
• B. A monthly buying budget created based on planned sales
• C. A method to analyze supplier performance
• D. Keeping safety stock at all times

Answer: (B)

Open to Buy is a budgeting approach for inventory control that tells you how much you can purchase in a given period based on forecasted sales and your current stock. It creates a monthly buying budget derived from planned sales, on-hand inventory, on-order commitments, and planned markdowns, so purchases stay aligned with the sales plan and don’t exceed what you can absorb into inventory. That makes the description about a monthly buying budget created based on planned sales the best fit. The other ideas describe different concepts: a fixed reorder point triggers replenishment when stock hits a low level, analyzing supplier performance focuses on supplier metrics, and keeping safety stock at all times means holding extra stock regardless of the budget.

Open to Buy is a budgeting approach for inventory control that tells you how much you can purchase in a given period based on forecasted sales and your current stock. It creates a monthly buying budget derived from planned sales, on-hand inventory, on-order commitments, and planned markdowns, so purchases stay aligned with the sales plan and don’t exceed what you can absorb into inventory. That makes the description about a monthly buying budget created based on planned sales the best fit.

The other ideas describe different concepts: a fixed reorder point triggers replenishment when stock hits a low level, analyzing supplier performance focuses on supplier metrics, and keeping safety stock at all times means holding extra stock regardless of the budget.