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Annual demand for raw material is 1,000,000 units. Each unit costs 15
cents. Procurement costs for each order are $20 and lead time has
been estimated as 2 days. There are 250 working days per annum, the
carrying cost of inventory is 10 cents per unit and the cost of a stock
out is 20 cents per unit.
What is the optimal reorder level?
A 125
B 8,000
C 20,000hi i dont know how to solve this question
the formula for reorder level is maximum usage* maximum lead time in the kaplan textbook
but in the answer this formula is not used can u please help me with thxThey need to reorder when they have enough inventory to last 2 days. They are using 1,000,000/250 = 4,000 units per day. Therefore the reorder level is 2 x 4,000 = 8,000.
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