Question

Company X sells 30,000 templates per year. The company orders templates 6 times per year and sells templates at a constant rate. If the company maintains no safety stock, what is the average inventory level of templates? Show how you derived at your results.

A. 30,000
B. 15,000
C. 5,000
D. 2,500

Answer 1

The average inventory level of Company X is 2,500 templates, calculated by dividing the annual sales by the number of orders per year and averaging the inventory over each cycle.

Step-by-step explanation:

To determine the average inventory level of templates for Company X, we need to divide the total annual sales by the number of orders placed each year. Since the company sells 30,000 templates annually and orders 6 times a year, it orders 5,000 templates each time (30,000 / 6 = 5,000). Assuming sales occur at a constant rate, the inventory will oscillate from 0 to 5,000 templates over the course of each ordering cycle, averaging out at half of the order quantity. Hence, the average inventory level would be 2,500 templates (5,000 / 2 = 2,500).