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The demand for an item is 900 units per month and the lead time is 10 days. In the past two month, the maximum demand observed is 50 units per day. For a re-ordering system based on inventory level, the re-order level (in units) is
- a)300
- b)200
- c)500
- d)600
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
The demand for an item is 900 units per month and the lead time is 10...
The re-order level (ROL) (when the demand varies and the lead time is constant) is given as
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ROL = average DDLT + buffer stock (BS)
Average consumption per day = 
= 30 units per day
= 30 units per dayAverage demand during lead dime (DDLT) = 30×10 = 300
BS = (maximum DDLT) - (Average DDLT)
= 50×10-30×10
= 200 units
ROL = 300+200 = 500 units.
Most Upvoted Answer
The demand for an item is 900 units per month and the lead time is 10...
Given data:
Demand for the item per month = 900 units
Lead time = 10 days
Maximum demand observed per day in the past two months = 50 units
Calculating Re-order level:
Re-order level is the point at which a new order should be placed to replenish the inventory. It is calculated by considering the demand during the lead time.
Step 1: Calculate demand per day
Demand per day = Demand per month / Number of days in a month
Demand per day = 900 units / 30 days = 30 units
Step 2: Calculate maximum demand during lead time
Maximum demand during lead time = Maximum demand per day * Lead time
Maximum demand during lead time = 50 units/day * 10 days = 500 units
Step 3: Calculate re-order level
Re-order level = Average demand per day * Lead time + Safety stock
Safety stock is the buffer stock kept to account for any unexpected increase in demand or delayed deliveries. Since the question does not provide any information about the safety stock, we can assume it to be zero.
Re-order level = Maximum demand during lead time
Re-order level = 500 units
Therefore, the re-order level for the item is 500 units. Hence, option C is the correct answer.
Demand for the item per month = 900 units
Lead time = 10 days
Maximum demand observed per day in the past two months = 50 units
Calculating Re-order level:
Re-order level is the point at which a new order should be placed to replenish the inventory. It is calculated by considering the demand during the lead time.
Step 1: Calculate demand per day
Demand per day = Demand per month / Number of days in a month
Demand per day = 900 units / 30 days = 30 units
Step 2: Calculate maximum demand during lead time
Maximum demand during lead time = Maximum demand per day * Lead time
Maximum demand during lead time = 50 units/day * 10 days = 500 units
Step 3: Calculate re-order level
Re-order level = Average demand per day * Lead time + Safety stock
Safety stock is the buffer stock kept to account for any unexpected increase in demand or delayed deliveries. Since the question does not provide any information about the safety stock, we can assume it to be zero.
Re-order level = Maximum demand during lead time
Re-order level = 500 units
Therefore, the re-order level for the item is 500 units. Hence, option C is the correct answer.
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The demand for an item is 900 units per month and the lead time is 10 days. In the past two month, the maximum demand observed is 50 units per day. For a re-ordering system based on inventory level, the re-order level (in units) isa)300b)200c)500d)600Correct answer is option 'C'. Can you explain this answer?
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The demand for an item is 900 units per month and the lead time is 10 days. In the past two month, the maximum demand observed is 50 units per day. For a re-ordering system based on inventory level, the re-order level (in units) isa)300b)200c)500d)600Correct answer is option 'C'. Can you explain this answer? for GATE 2024 is part of GATE preparation. The Question and answers have been prepared according to the GATE exam syllabus. Information about The demand for an item is 900 units per month and the lead time is 10 days. In the past two month, the maximum demand observed is 50 units per day. For a re-ordering system based on inventory level, the re-order level (in units) isa)300b)200c)500d)600Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for GATE 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The demand for an item is 900 units per month and the lead time is 10 days. In the past two month, the maximum demand observed is 50 units per day. For a re-ordering system based on inventory level, the re-order level (in units) isa)300b)200c)500d)600Correct answer is option 'C'. Can you explain this answer?.
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