The annual demand for a product has been projected at 2,000 units.This demand is assumed to be constant throughout the year.The ordering cost is $20 per order,and the holding cost is 20 percent of the purchase cost.Currently,the purchase cost is $40 per unit.There are 250 working days per year.Whenever an order is placed,it is known that the entire order will arrive on a truck in 6 days.Currently,the company is ordering 500 units each time an order is placed.What should be the reorder point (excluding any safety stock)under the current policy?
A)48
B)100
C)6
D)24
E)None of the above

Question

Quizplus · Accepted Answer

The reorder point is calculated as the daily demand multiplied by the lead time. Daily demand is 2000 units / 250 days = 8 units per day. With a lead time of 6 days, the reorder point is 8 units/day * 6 days = 48 units.

The Annual Demand for a Product Has Been Projected at 2,000