How much of this purchase order can you cancel?
Keep the reserve and show when the supplier payment changes.
The question
An industrial parts supplier is ready to dispatch an order. You can reduce the order by any whole-unit quantity before today’s cutoff, with no charge. Keep at least the stated reserve at the end of each week. Pay the supplier when the order arrives.
| Value | |
|---|---|
| Usable units at start of week 1 | 2400 |
| Demand per week | 700 |
| Required week-end reserve | 400 |
| Units on cancellable order | 1600 |
| Purchase cost per unit ($) | 25 |
| Week when cancellable order arrives | 2 |
| Week of next possible receipt after this order | 5 |
Receipts arrive at the start of their week. Demand is fulfilled during the week. No other receipt occurs before the next possible one.
“Reduce the order as far as you can while protecting the reserve.”
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Draw the time window
What would you do here? Open the move you’d make.
Plan through the end of week 4 with 400 units left.
The strong move. Use the dates of usable stock, demand and the next receipt.
Cut the order using only the week 1 stock and demand.
Tempting, but it misses something. The following three weeks also draw on stock before another order can arrive.
See how a strong candidate says it
“Week 1 uses 700 and leaves 1,700 before the order arrives. I need to cover demand through week 4 and still have 400 units when the next receipt arrives at the start of week 5.”
Why it works: Use the dates of usable stock, demand and the next receipt.
Step 2: Set the minimum order
What would you do here? Open the move you’d make.
Keep 800 units and avoid $20,000 of the week 2 payment.
The strong move. The cut reduces a future payment and leaves the full reserve.
Keep 400 units because the current stock covers most demand.
Tempting, but it misses something. That leaves zero units at the end of week 4. The reserve requires another 400.
See how a strong candidate says it
“Four weeks use 2,800 units. With 400 reserve and 2,400 on hand, I need 800 from the order. Cancel 800 and pay $20,000 in week 2 instead of $40,000.”
Why it works: The cut reduces a future payment and leaves the full reserve.
Step 3: Recheck the next arrival
The next receipt after this order now cannot arrive before the start of week 6. The week 2 order and today’s cancellation cutoff still hold.
What would you do here? Open the move you’d make.
Keep 1,500 units and cancel 100.
The strong move. The later receipt adds another week of demand before replenishment.
Keep the earlier 800-unit order and the $20,000 payment reduction.
Tempting, but it misses something. That plan has 3,200 units available for 3,500 units of demand. It falls 300 units short before the next receipt.
See how a strong candidate says it
“Five weeks use 3,500 units. I need 1,500 on this order to keep 400 in reserve. Cancel 100 and pay $37,500 in week 2, or $2,500 less than the original order.”
Why it works: The later receipt adds another week of demand before replenishment.
Step 4: Give Finance the timing
What would you do here? Open the move you’d make.
Report the $2,500 week 2 payment reduction and the reserve.
The strong move. State the cash timing and the service condition behind the smaller payment.
Record the $2,500 as an immediate profit gain.
Tempting, but it misses something. The decision reduces an order payment when it arrives. The packet gives no sale, margin change or immediate cash receipt.
See how a strong candidate says it
“The $2,500 is a lower supplier payment at receipt in week 2. I’ll check the demand and arrival dates before the cancellation is firm. The plan ends week 5 with the full 400 units.”
Why it works: State the cash timing and the service condition behind the smaller payment.
The answer, in short
- Decision
- Keep 1,500 units and avoid $2,500 of the original week 2 payment.
- Because
- The next receipt is later, so the plan must cover five weeks and leave 400 units.
- What would change it
- A reliable earlier receipt or lower confirmed demand could allow a larger cancellation.
Common traps
- Reducing stock without checking the time until the next receipt.
- Calling a smaller future payment a profit gain.
Check your answer
- I placed the receipts and demand on the same timeline.
- I kept the week-end reserve.
- I revised the order after the slip.
- I explained the cash timing.
Last reviewed Nov 11, 2026