Pika Pumps uses a special component in manufacturing its pool pumps.Pika produces 26,000 pool pumps per year, each of which requires one of these special components.The annual cost of holding one component is $4 and Pika's management estimates that the cost of placing and receiving a typical order is $125.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 demand during lead time. With a production of 26,000 pumps per year and 52 weeks, the weekly demand is 500 components. Since the lead time is one week, the reorder point is 500 components.

Pika Pumps Uses a Special Component in Manufacturing Its Pool