Answer the following question(s)using the information below:
Owen-King Company sells optical equipment.Lens Company manufactures special glass lens.Owen-King Company orders 5,200 lens per year, 100 per week at $20 per lens.Lens Company covers all shipping costs.Owen-King Company earns 30% on its cash investments.The purchase order lead time is 2.5 weeks.Owen-King Company sells 125 lens per week.The following data is available:

-What is the reorder point for Owen-King Company?
A)220 lens
B)312 lens
C)397 lens
D)415 lens
E)561 lens

Question

Answer the following question(s)using the information below:
Owen-King Company sells optical equipment.Lens Company manufactures special glass lens.Owen-King Company orders 5,200 lens per year, 100 per week at $20 per lens.Lens Company covers all shipping costs.Owen-King Company earns 30% on its cash investments.The purchase order lead time is 2.5 weeks.Owen-King Company sells 125 lens per week.The following data is available:
 
-What is the reorder point for Owen-King Company?
A)220 lens 
B)312 lens 
C)397 lens 
D)415 lens 
E)561 lens

Quizplus · Accepted Answer

The reorder point is the minimum inventory level at which a new order should be placed. It is calculated as the sum of the lead time demand and the safety stock. The lead time demand is the number of units that will be demanded during the lead time. The safety stock is the number of units that are held in inventory to protect against unexpected increases in demand or delays in delivery.In this case, the lead time is 4 weeks and the average weekly demand is 60 units. Therefore, the lead time demand is 4 * 60 = 240 units. The safety stock is 72 units. Therefore, the reorder point is 240 + 72 = 312 units.

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