The Steel Works, Inc. is required to carry a minimum of 40 days' raw steel, which is 250 tons. It takes 15 days between order and delivery. At what level of steel would Steel Works reorder?
A) 3,750 tons
B) 667 tons
C) 344 tons
D) 600 tons

Question

Quizplus · Accepted Answer

Steel Works needs to reorder when the inventory level reaches the amount needed for the lead time (15 days) plus the minimum required (40 days). The daily usage is 250 tons / 40 days = 6.25 tons/day. For 15 days, they need 15 * 6.25 = 93.75 tons. Adding the minimum 250 tons, they should reorder at 344 tons.