Question 157 from kaplan management accounting exam kit 2020:
A large store selling office furniture stocks a popular chair for which the following information is available:
Annual demand: 4,000 chairs
Maximum inventory: 75 chairs
Minimum inventory: 20 chairs
Lead time: 5 days
Reorder quantity: 100 chairs
Answer: Average inventory is EOQ/2 + minimum inventory = 70 chairs
I am confused as i thought calculation of average inventory already takes minimum inventory into consideration, an explanation would be helpful.