If projected on-hand = ending inventory of last week + receipts – gross requirements, then a negative result means:

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In this inventory calculation, projected on-hand = ending inventory of last week + receipts – gross requirements. When this result is negative, it means that the planned supply (ending inventory plus incoming receipts) is not enough to meet the gross requirements, i.e., a shortage exists.

Option 1: 'Excess inventory' would require a positive projected on-hand. A negative result directly contradicts excess inventory, so this statement is incorrect.

Option 2: 'A planned order is needed' aligns with the idea of a shortage: to cover the shortfall, a planned order (to procure or produce more) is typically required. This makes it the correct interpretation of a negative value.

Option 3: 'Master Production Schedule must be reduced' suggests altering the MPS downward. While a shortage might lead to adjustments, the direct implication of a negative projected on-hand is the need to offset the shortfall with a planned order rather than an automatic reduction of the MPS. Therefore this claim is not precisely implied by the negative value.

Option 4: 'The Bill of Materials is incorrect' is not indicated by a negative on-hand calculation. BOM correctness concerns structure and quantities of components, not the inventory position calculation itself.

Overall, the negative result signals a shortage that would typically trigger a planned order to satisfy demand, while the other choices describe issues not inherently implied by a negative projected on-hand.

MGS3100W10 25 Fall OM Exam 3 - Requires Respondus LockDown Browser

If projected on-hand = ending inventory of last week + receipts – gross requirements, then a negative result means:

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