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reorder level

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › reorder level

  • This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 13, 2022 at 7:06 pm #663034
    kashafaltaf500
    Participant
    • Topics: 29
    • Replies: 10
    • ☆

    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 20,000

    hi 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 thx

    August 14, 2022 at 11:40 am #663046
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54684
    • ☆☆☆☆☆

    They 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.

    August 23, 2022 at 1:27 pm #664053
    kashafaltaf500
    Participant
    • Topics: 29
    • Replies: 10
    • ☆

    thx

    August 23, 2022 at 6:02 pm #664080
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54684
    • ☆☆☆☆☆

    You are welcome.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘reorder level’ is closed to new replies.

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