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The demand for a commodity is 100 units per day. Every time an order is placed, a fixed cost of Rs. 400 is incurred. Holding cost is Rs. 0.08 per unit per day. If the lead-time is 13 days, then the re-order point is
- a)100 units
- b)200 units
- c)300 units
- d)350 units
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
The demand for a commodity is 100 units per day. Every time an order ...
Length of cycle = t0
As lead time is 13 days and cycle length is 10 days .recorded point
= (13 − 10 × 100) = 300 units
Most Upvoted Answer
The demand for a commodity is 100 units per day. Every time an order ...
Re-order point is the inventory level at which a new order should be placed to replenish the stock. It is determined by considering the demand during the lead time and the desired level of service. In this case, the lead time is given as 13 days and the demand for the commodity is 100 units per day.
To calculate the re-order point, we need to consider two factors: the average demand during the lead time and the safety stock.
1. Average demand during lead time:
The average demand during the lead time can be calculated by multiplying the daily demand by the lead time. In this case, the daily demand is 100 units and the lead time is 13 days.
Average demand during lead time = 100 units/day * 13 days = 1300 units
2. Safety stock:
Safety stock is the extra inventory maintained to mitigate the risk of stockouts due to demand variability or lead time variability. It provides a buffer to cover any unexpected increase in demand or delays in the supply chain. In this case, the safety stock is not given, so we can assume it to be zero.
3. Re-order point:
The re-order point is the sum of the average demand during lead time and the safety stock.
Re-order point = Average demand during lead time + Safety stock
= 1300 units + 0 units
= 1300 units
Therefore, the re-order point in this case is 1300 units. Since none of the given options match this answer, it seems that there might be an error in the question or the answer choices. Without further information, it is not possible to determine the correct re-order point.
To calculate the re-order point, we need to consider two factors: the average demand during the lead time and the safety stock.
1. Average demand during lead time:
The average demand during the lead time can be calculated by multiplying the daily demand by the lead time. In this case, the daily demand is 100 units and the lead time is 13 days.
Average demand during lead time = 100 units/day * 13 days = 1300 units
2. Safety stock:
Safety stock is the extra inventory maintained to mitigate the risk of stockouts due to demand variability or lead time variability. It provides a buffer to cover any unexpected increase in demand or delays in the supply chain. In this case, the safety stock is not given, so we can assume it to be zero.
3. Re-order point:
The re-order point is the sum of the average demand during lead time and the safety stock.
Re-order point = Average demand during lead time + Safety stock
= 1300 units + 0 units
= 1300 units
Therefore, the re-order point in this case is 1300 units. Since none of the given options match this answer, it seems that there might be an error in the question or the answer choices. Without further information, it is not possible to determine the correct re-order point.
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The demand for a commodity is 100 units per day. Every time an order is placed, a fixed cost of Rs. 400 is incurred. Holding cost is Rs. 0.08 per unit per day. If the lead-time is 13 days, then the re-order point isa)100 unitsb)200 unitsc)300 unitsd)350 unitsCorrect answer is option 'C'. Can you explain this answer?
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