Question

A manufacturing firm is trying to decide when to order more products. They are open 50 weeks per year, and every week they have demand of 80 products. They manufacture products 200 days per year. The product has a lead time of 10 days. At what quantity should they order more products?

a. 160
b. 114
c. 208
d. 200
e. 228

Answer 1

The firm should order more products when the inventory level falls to 160 units, by calculating the reorder point based on the weekly demand and lead time in weeks.

Step-by-step explanation:

The manufacturing firm needs to determine when to order more products based on their demand and lead time. To calculate this, we need to know the weekly demand and the lead time in weeks. The firm is open 50 weeks per year with a weekly demand of 80 products. They have a lead time of 10 days, and there are typically 5 working days in a week.

First, calculate the lead time in weeks:
Lead time in weeks = Lead time in days / 5
Lead time in weeks = 10 / 5
Lead time in weeks = 2.

Next, calculate the reorder point using the weekly demand and the lead time in weeks:
Reorder point = Weekly demand × Lead time in weeks
Reorder point = 80 × 2
Reorder point = 160.

Therefore, the firm should order more products when the inventory level falls to 160 units. Answer choice (a) is correct.