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The demand for a commodity is 100 units per day. The ordering cost is Rs. 200/order and the carrying cost is Rs. 20/unit/year. If the lead time is 13 days, the re-order point is ____________
  • a)
    1200
  • b)
    1120
  • c)
    1300
  • d)
    1280
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
The demand for a commodity is 100 units per day. The ordering cost is...
Daily demand = 100 units
LT = 13 days
ROP/ROL = daily demand × LT
= 100 × 13 = 1300 units
Free Test
Community Answer
The demand for a commodity is 100 units per day. The ordering cost is...
Understanding Re-order Point (ROP)
The re-order point (ROP) is a crucial aspect of inventory management, determining when a new order should be placed to avoid stockouts. It is calculated based on the demand during the lead time.
Given Data
- Daily Demand: 100 units/day
- Lead Time: 13 days
Calculating the Re-order Point
To calculate the ROP, use the formula:
ROP = Daily Demand × Lead Time
Step-by-Step Calculation
1. Identify Daily Demand:
- The demand for the commodity is 100 units per day.
2. Identify Lead Time:
- The lead time, which is the time taken for an order to be delivered, is 13 days.
3. Calculate ROP:
- Multiply the daily demand by the lead time:
- ROP = 100 units/day × 13 days = 1300 units.
Conclusion
The re-order point is 1300 units. Thus, when the inventory level reaches 1300 units, a new order should be placed to replenish stock.
Therefore, the correct answer is option 'C' (1300).
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