Which method creates a monthly buying budget based on planned sales?

• A. Just in Time Method
• B. Open to Buy Method
• C. Min/Max Method
• D. E-Procurement

Answer: (B)

Open to Buy is the planning method that aligns purchasing with forecasted demand. It starts with the period’s planned or forecasted sales and uses that to set how much inventory you should have available. By comparing the planned sales to what you already have on hand and what you’re currently committed to receive, you determine a target ending inventory and the exact amount to buy in that month. This creates a monthly buying budget that ensures purchases support expected demand while avoiding overstock or stockouts and staying within financial limits.

Other methods don’t tie purchasing to the monthly sales forecast in the same way. Just in Time aims to minimize inventory by ordering to arrive exactly when needed, not to set a monthly budget from sales plans. Min/Max focuses on maintaining minimum and maximum stock levels, not on budgeting purchases to match forecasted sales. E-Procurement refers to the electronic process of ordering rather than how much to buy based on planned sales.