ITPEC FE Morning April 2018 Question 71

MRP Net Requirements Calculation — what input is needed to calculate net (shortage) requirements in MRP

MRP (Material Requirements Planning) follows a fixed sequence:

1. Master schedule → what to produce and when
2. Gross requirements → total materials needed (uses Bill of Materials)
3. Net requirements → shortage after subtracting what's already available
4. Order quantity → how much to order (uses ordering policy)
5. Arrangement plan → when to order (uses lead time / standard schedule)
6. Arrangement instructions → issue purchase/production orders

To calculate net requirements, the system subtracts existing inventory from gross requirements:

Net requirements = Gross requirements − (on-hand inventory + scheduled receipts + in-process quantity)

This means the input "A" must be inventory status — current stock levels, pending orders, and work-in-process quantities.

Why not others:
- a) Bill of materials — used earlier, at the gross requirements stage, to explode the product into its component parts
- c) Ordering policy — used later, at the order quantity stage, to determine lot sizes and ordering methods
- d) Standard schedule — used later, at the arrangement plan stage, to account for lead times and completion periods

Key rule: In MRP, "net" always means "gross minus what you already have" — so the input is always inventory status.

AI-generated — may contain errors