Question

If the lead time is 1 week, the review period 1 week, the average demand 100 units per week and the safety stock is 50 units, the target level will be:

A) 200 units.
B) 300 units.
C) 150 units.
D) 250 units.
E) none of the above

Answer 1

The target inventory level with a 1-week lead time, 1-week review period, average demand of 100 units per week, and safety stock of 50 units is 250 units. The correct answer is D.

Step-by-step explanation:

If the lead time is 1 week, the review period is 1 week, the average demand is 100 units per week and the safety stock is 50 units, then the target inventory level is calculated by taking the sum of the product demand during the lead time and review period plus the safety stock.

This is because the target inventory level must cover the average demand during both the time it takes to review the inventory situation (review period) and the time it takes to receive the items once an order has been placed (lead time), plus any additional stock to buffer against uncertainties (safety stock).

To calculate the target inventory level: (Average Demand per week × (Lead time + Review period)) + Safety Stock = (100 units/week × (1 week + 1 week)) + 50 units = (100 units/week × 2 weeks) + 50 units = 200 units + 50 units = 250 units.

Therefore, the correct answer is D) 250 units.