Albuquerque Company has the following information available concerning one of its inventory items: $$\begin{array} { l r }
\text { Cost of placing an or der } & \$ 50.00 \
\text { Unit carrying cost per year } & \$ 2.00 \
\text { Annual unit demand } & 3,200 \
\text { Safety stock } & 80 \
\text { Average daily demand } & 10 \
\text { Normal lead time in days } & 12
\end{array}$$ The reorder point for the inventory item is
A)500 units.
B)970 units.
C)320 units.
D)200 units.

Question

Albuquerque Company has the following information available concerning one of its inventory items: $$\begin{array} { l r } 
\text { Cost of placing an or der } & \$ 50.00 \
\text { Unit carrying cost per year } & \$ 2.00 \
\text { Annual unit demand } & 3,200 \
\text { Safety stock } & 80 \
\text { Average daily demand } & 10 \
\text { Normal lead time in days } & 12
\end{array}$$ The reorder point for the inventory item is
A)500 units.
B)970 units.
C)320 units.
D)200 units.

Quizplus · Accepted Answer

The reorder point formula is: Reorder Point = (Average Daily Demand × Lead Time) + Safety Stock. Here, it's (10 units/day × 12 days) + 80 units = 120 units + 80 units = 200 units.

Albuquerque Company Has the Following Information Available Concerning One of Its