Titan Company, a distributor of high quality pens, carries a safety stock of pens. If the maximum daily usage is 70, the average daily rate of usage is 50 pens per day and the number of lead days of 5 required by the supplier. What is the re-order point for ordering pens?
A) 250 pens
B) 350 pens
C) 100 pens
D) 50 pens

Question

Quizplus · Accepted Answer

Re-order point = (maximum daily usage x lead time) + safety stock
Re-order point = (70 x 5) + safety stock
Since the average daily rate of usage is 50, the safety stock can be calculated as:
Safety stock = (average daily rate of usage x lead time) - minimum daily usage required
Safety stock = (50 x 5) - 70 = 180
Re-order point = (70 x 5) + 180 = 350 pens. Therefore, the best choice is B.

Titan Company, a Distributor of High Quality Pens, Carries a Safety