Question

There are two Statements, Assertion and Reason (R). Assertion : Larger the lead time, larger is the quantity of material required to be stored and larger shall be the amount of working capital required. Reason (R): If the raw material does not have a record of uninterrupted availability, higher stock levels may be required. Choose the correct alternative from the alternatives given below:

• A. Assertion is false and Reason (R) is true.
• B. Both Assertion and Reason (R) are false.
• C. Assertion is true and Reason (R) is false.
• D. Both Assertion and Reason (R) are true and Reason (R) is the correct explanation of Assertion .

Hint:

Lead time is the delay between ordering and receiving materials. Longer lead times require higher material stock to maintain uninterrupted production.- Working capital is the capital required for day-to-day operations and is impacted by the level of inventory held.

Answer 1

The Correct Option is D

- Assertion : Larger lead time means a longer time before raw materials are delivered. To meet production schedules, higher stock levels are needed to avoid production delays, and this increases working capital requirements. Hence, Assertion is true.-
Reason (R): If raw materials are not continuously available or have uncertain supply patterns, businesses need to keep larger stock levels as a buffer to ensure uninterrupted production. Thus, Reason (R) is also true and it explains why larger lead time increases material requirements. Since both the assertion and reason are true, and the reason explains the assertion, the correct answer is .