Flashdrive Company sells 200 flash drives per week. Purchase-order lead time is 1-1/2 weeks and the economic-order quantity is 450 units. What is the reorder point?
A)200 units
B)300 units
C)750 units
D)1,125 units

Question

Quizplus · Accepted Answer

To calculate the reorder point, we need to consider the demand during lead time. 
Demand during lead time = Average weekly demand x Lead time
= 200 units/week x 1.5 weeks
= 300 units

Then, we add safety stock to the demand during lead time. 
Safety stock = z-score x standard deviation of demand during lead time
Assuming a z-score of 1.65 (corresponding to a 95% service level) and a standard deviation of 20 units, 
Safety stock = 1.65 x 20
= 33 units

Therefore, the reorder point = demand during lead time + safety stock
= 300 units + 33 units
= 333 units, which is closest to choice B) 300 units.

Flashdrive Company Sells 200 Flash Drives Per Week