Question

A company works 320 days per year and has an annual demand of 2080 units of product desires to set an reorder point that will cover demand during lead time. If the lead time is 4 working days, what should the reorder point be? Group of answer choices

6.5 units
14 units
20 units
26 units
160 units

Answer 1

D. Re-order point = 26 days

Step-by-step explanation:

Given,

Annual Demand, D = 2,080 units

Number of working days = 320 days

Lead time = 4 days

We know,

Re-order point = (Annual demand/Number of working days)*Lead Time

Re-order point = (Annual demand/Number of working days)*Lead Time

Re-order point = (2,080/320)*4

Re-order point = (6.5*4)

Re-order point = 26 days

Therefore, the answer choice is D.

As there is no maximum and average lead time and no replenishment stock, I exclude the safety stock from the re-order point calculation.