Dazzle Graphics uses a special purpose paper on 80% of its jobs.The paper is purchased in 100- sheet packages at a cost of $100 per package.Management estimates that the cost of placing and receiving a typical order is $15, and the annual cost of carrying a package in inventory is $1.50. Dazzle uses 2,600 packages each year.Production is constant, and the lead time to receive an order is one week.(Assume 52 weeks in a year.) The reorder point is:

Question

Quizplus · Accepted Answer

The reorder point is calculated as the lead time demand. With a constant production and a lead time of one week, the weekly demand is 2,600 packages / 52 weeks = 50 packages. Therefore, the reorder point is 50 packages.

Dazzle Graphics Uses a Special Purpose Paper on 80% of Its