Determining the reorder quantity is an important decision that businesses need to make in order to maintain a sufficient inventory level while minimizing costs. The reorder quantity is the quantity of a product that should be ordered each time the inventory level reaches a certain point, known as the reorder point. In order to calculate the reorder quantity, we need to consider the annual demand, purchase price, ordering cost, and storing cost.

Annual demand:
The annual demand is the total quantity of the product that is expected to be sold or used within a year. In this case, the annual demand is given as 3000 units.

Purchase price:
The purchase price is the cost per unit of the product. In this case, the purchase price is given as 1.20 per unit.

Ordering cost:
The ordering cost is the cost incurred each time an order is placed for the product. This cost includes administrative expenses, transportation costs, and any other costs associated with placing an order. In this case, the ordering cost is given as 3 per unit.

Storing cost:
The storing cost is the cost incurred for storing or holding the inventory. This cost includes expenses such as rent, utilities, insurance, and handling costs. In this case, the storing cost is given as 20% per unit.

Now, let's calculate the reorder quantity using the Economic Order Quantity (EOQ) formula:

Reorder Quantity = √((2 * Annual Demand * Ordering Cost) / Storing Cost)

Reorder Quantity = √((2 * 3000 * 3) / (0.2 * 1.20))

Reorder Quantity = √(18000 / 0.24)

Reorder Quantity = √75000

Reorder Quantity ≈ 273.86

Therefore, the reorder quantity should be approximately 273.86 units.

The EOQ formula calculates the optimal reorder quantity that minimizes the total cost of ordering and holding inventory. By considering the annual demand, purchase price, ordering cost, and storing cost, businesses can determine the most cost-effective quantity to order each time the inventory needs to be replenished. This helps in managing inventory levels efficiently and minimizing costs associated with ordering and holding inventory.