In merchandising, which concept is a budget used to plan purchases and manage stock levels?

• A. Reorder point
• B. Open-to-buy
• C. Economic order quantity
• D. Lead time

Answer: (B)

Open-to-buy is the budgeting tool used to plan purchases and manage stock levels in merchandising. It represents the amount of money available to spend on new merchandise within a specific period, and it keeps purchases aligned with sales forecasts and target inventory. By accounting for what you already have on hand, what you’ve committed to buy, and what you expect to receive, open-to-buy shows how much budget remains for new orders. When there’s money left, you can place more orders; when it’s exhausted, you pause purchases to avoid overstock or overspending. This approach differs from a reorder point, which is simply the inventory level that triggers a reorder; from economic order quantity, which focuses on calculating an optimal order size to minimize costs; and from lead time, which is the time needed to receive goods after ordering and affects timing rather than the budget itself.