Olga Company has an economic order quantity for item B of 100 units. The annual demand for the product is 1,400 units, and the unit carrying cost per year is $7. The company operates 200 days a year, the lead time for the item is ten days, and the safety stock is 100 units.
What is the reorder point?
A)70 units
B)100 units
C)1000 units
D)170 units

Question

Quizplus · Accepted Answer

Reorder point = (average daily demand x lead time) + safety stock

Average daily demand = 1,400 / 200 = 7 units per day

Lead time = 10 days

Safety stock = 100 units

Reorder point = (7 x 10) + 100 = 170 units

So, the reorder point is 170 units.

The best choice is D as it gives the correct calculation of reorder point based on the given information.

Olga Company Has an Economic Order Quantity for Item B