The annual demand for a product is 1,000 units.The company orders 200 units each time an order is placed.The lead-time is 6 days.There are 250 working days per year.If the reorder point is 50, what safety stock are they using?
A)22
B)4
C)26
D)28

Question

Quizplus · Accepted Answer

Reorder point = (Demand per day * Lead time) + Safety stock

Demand per day = Annual demand / Working days per year
Demand per day = 1000/250
Demand per day = 4

Reorder point = (4 * 6) + 50
Reorder point = 74

Since the reorder point is 50, they are using a safety stock of: 
Safety stock = Reorder point - (Demand per day * Lead time)
Safety stock = 50 - (4 * 6)
Safety stock = 26

Therefore, the correct answer is C) 26.

The Annual Demand for a Product Is 1,000 Units