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The average inventory in this ques is calculated as the minimum level plus [1/2 of the reorder quantity]. My question is why isn’t it 1/2 of the [minimum level plus the reorder quantity] ?
ok, i got the answer…….so the largest quantity would be the demand of 100,000 plus the min quantity of 10,000 thereby giving an average of 110,000 X 1/2= 60,000….but why would this calculation not be correct even though i get the same answer as the text?
Of course it would be correct!! There is often more than one way of arriving at the same answer.
It is your workings that get the marks – not the final answer – and it doesn’t matter how you do your workings!
It doesn’t equal 60000!
The maximum is 110000 and the minimum is 10000. So the average is (110000+10000)/2.
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