Question

If the lead time is 1 week, the review period 4 weeks, the average demand 100 units per week and the safety stock is 50 units, the target level will be:

A) 300 units.
B) 250 units.
C) 200 units.
D) 550 units.
E) 150 units.

Answer 1

The target inventory level is the sum of the product of the average demand and the total of the lead time and review period plus the safety stock, which in this case results in 550 units (Option D).

Step-by-step explanation:

The question pertains to calculating the target inventory level for a company based on given parameters such as lead time, review period, average demand, and safety stock.

To find the target inventory level, we need to sum the product of the average demand and the sum of the lead time and review period with the safety stock:

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• 
  
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The target inventory level can be calculated as follows:

Target Inventory Level = (Average Demand × (Lead Time + Review Period)) + Safety Stock

Target Inventory Level = (100 units/week × (1 week + 4 weeks)) + 50 units

Target Inventory Level = (100 units/week × 5 weeks) + 50 units

Target Inventory Level = 500 units + 50 units

Target Inventory Level = 550 units

Therefore, the correct answer is D) 550 units.