The reorder point is simplest to compute when:
A)the safety stock amount never varies.
B)the number of units sold varies.
C)the relevant ordering costs and the relevant carrying costs are equal.
D)both demand and purchase-order lead times are known with certainty.

Question

Quizplus · Accepted Answer

Reorder point is the level of inventory at which a new order should be placed to avoid stockouts. In order to determine the reorder point, it is necessary to know the demand and the purchase-order lead time, which are both known with certainty in this scenario. Therefore, choice D is the best option. The safety stock amount, variation in the number of units sold, and the relevant ordering costs and carrying costs are not directly relevant to the calculation of the reorder point.

The Reorder Point Is Simplest to Compute When