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The question is as follows: Average usage of a raw material is 200kg per day,
the average ordering lead time is five days, the reorder level is 1,600kg and the reorder quantity is 2,800kg.
What is the average raw material inventory?The answer is as follows: (3,400kg + 600kg) /2.
The problem is where did it obtain 3,400kg and 600kg?- Topics: 0
- Replies: 63
- ☆☆
Average inventory = reorder quantity/2 + minimum level
minimum level = reorder level – (average usage x average lead time)
minimum level = 1600 – (200 x 5) = 600kgaverage inventory = 2800/2 + 600 = 2000kg
Well I don’t know where does 3400kg comes from but if you do step by step like above, you will get 2000kg which is also same answer as yours. So the key to solve this question is to first state the formula of average inventory, then see if there is any information available for you to get reorder quantity and minimum level 🙂
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