Question

Question Help The production demand for widgets for a​ 250-workday year is​ 7,500 units. Ordering costs are​ $25.00 per order and carrying costs are​ $9.00 per unit per year. Four days must be allowed between order placement and order receipt. What is the reorder​ point, assuming known and constant​ variables?

Answer 1

120

Step-by-step explanation:

Data provided in the question:

Number of workdays in a year = 250

Demand, D = 7,500 units

Ordering costs, F =​ $25.00 per order

Carrying costs, C =​ $9.00

Lead time = 4 days

Now,

Reorder point = Lead Time in days × Average Daily Demand

also,

Average Daily Demand = Demand ÷ Number of workdays in a year

= 7500 ÷ 250

= 30

Thus,

Reorder point = 4 × 30

= 120