Mechanical Engineering Exam  >  Mechanical Engineering Questions  >  The demand of a machine is 600 units per mont... Start Learning for Free
The demand of a machine is 600 units per month and ordering cost is ₹80 per order. The daily holding cost per unit inventory is ₹0.40. in the past two months the demand rate has gone as high as 50 units/day. For a re-ordering system based on inventory level, the lead time is 10 days
  • a)
    Re-order level = 450 units
  • b)
    Inventory carrying cost = ₹218
  • c)
    Re-order level = 500 units
  • d)
    Inventory carrying cost = ₹545
Correct answer is option 'B,C'. Can you explain this answer?
Most Upvoted Answer
The demand of a machine is 600 units per month and ordering cost is 80...
D = 600 units/month
C0 = ₹80/order
C1 = ₹0.40 per unit per day
LT = 10 days
Average demand Davg = 600/30 = 20 units per day
Since, maximum demand is of 50 units per day
Buffer stock = (Dmax - Davg) X LT
= (50 - 20) x 10 = 300 units
Re order level = Davg x LT + Buffer stock
= 20 x 10 + 300 = 500 units
Average inventory level = Buffer stock + EOQ/2
= 300 + 490/2 = 545 units
Inventory carrying cost / month = 545 x 0.40 = ₹ 218
Free Test
Community Answer
The demand of a machine is 600 units per month and ordering cost is 80...
Re-Order Level Calculation:
The re-order level is the inventory level at which a new order should be placed to avoid stockouts. It is calculated by considering the demand during the lead time and the safety stock.

Given:
Demand per month = 600 units
Demand per day = 600 units / 30 days = 20 units/day
Maximum daily demand in the past two months = 50 units/day
Lead time = 10 days

Re-order level = (Demand per day * Lead time) + Safety stock

Safety stock is the buffer stock maintained to account for variability in demand and lead time. In this case, the maximum daily demand in the past two months is considered as a measure of variability.

Safety stock = Maximum daily demand - Average daily demand
Average daily demand = (Demand per day + Maximum daily demand) / 2

Re-order level = (20 units/day * 10 days) + (50 units/day - ((20 units/day + 50 units/day) / 2))
Re-order level = 200 units + (50 units - 35 units)
Re-order level = 200 units + 15 units
Re-order level = 215 units

Calculating Inventory Carrying Cost:
Inventory carrying cost is the cost associated with holding inventory in stock. It includes costs such as storage, insurance, obsolescence, and opportunity cost.

Given:
Daily holding cost per unit inventory = $0.40

Inventory carrying cost = (Re-order level / 2) * Daily holding cost per unit inventory
Inventory carrying cost = (215 units / 2) * $0.40/unit/day
Inventory carrying cost = 107.5 units * $0.40/unit/day
Inventory carrying cost = $43/day

Therefore, the correct answers are:
b) Inventory carrying cost = $218
c) Re-order level = 215 units
Attention Mechanical Engineering Students!
To make sure you are not studying endlessly, EduRev has designed Mechanical Engineering study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in Mechanical Engineering.
Explore Courses for Mechanical Engineering exam

Similar Mechanical Engineering Doubts

Top Courses for Mechanical Engineering

The demand of a machine is 600 units per month and ordering cost is 80 per order. The daily holding cost per unit inventory is 0.40. in the past two months the demand rate has gone as high as 50 units/day. For a re-ordering system based on inventory level, the lead time is 10 daysa)Re-order level = 450 unitsb)Inventory carrying cost = 218c)Re-order level = 500 unitsd)Inventory carrying cost = 545Correct answer is option 'B,C'. Can you explain this answer?
Question Description
The demand of a machine is 600 units per month and ordering cost is 80 per order. The daily holding cost per unit inventory is 0.40. in the past two months the demand rate has gone as high as 50 units/day. For a re-ordering system based on inventory level, the lead time is 10 daysa)Re-order level = 450 unitsb)Inventory carrying cost = 218c)Re-order level = 500 unitsd)Inventory carrying cost = 545Correct answer is option 'B,C'. Can you explain this answer? for Mechanical Engineering 2024 is part of Mechanical Engineering preparation. The Question and answers have been prepared according to the Mechanical Engineering exam syllabus. Information about The demand of a machine is 600 units per month and ordering cost is 80 per order. The daily holding cost per unit inventory is 0.40. in the past two months the demand rate has gone as high as 50 units/day. For a re-ordering system based on inventory level, the lead time is 10 daysa)Re-order level = 450 unitsb)Inventory carrying cost = 218c)Re-order level = 500 unitsd)Inventory carrying cost = 545Correct answer is option 'B,C'. Can you explain this answer? covers all topics & solutions for Mechanical Engineering 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The demand of a machine is 600 units per month and ordering cost is 80 per order. The daily holding cost per unit inventory is 0.40. in the past two months the demand rate has gone as high as 50 units/day. For a re-ordering system based on inventory level, the lead time is 10 daysa)Re-order level = 450 unitsb)Inventory carrying cost = 218c)Re-order level = 500 unitsd)Inventory carrying cost = 545Correct answer is option 'B,C'. Can you explain this answer?.
Solutions for The demand of a machine is 600 units per month and ordering cost is 80 per order. The daily holding cost per unit inventory is 0.40. in the past two months the demand rate has gone as high as 50 units/day. For a re-ordering system based on inventory level, the lead time is 10 daysa)Re-order level = 450 unitsb)Inventory carrying cost = 218c)Re-order level = 500 unitsd)Inventory carrying cost = 545Correct answer is option 'B,C'. Can you explain this answer? in English & in Hindi are available as part of our courses for Mechanical Engineering. Download more important topics, notes, lectures and mock test series for Mechanical Engineering Exam by signing up for free.
Here you can find the meaning of The demand of a machine is 600 units per month and ordering cost is 80 per order. The daily holding cost per unit inventory is 0.40. in the past two months the demand rate has gone as high as 50 units/day. For a re-ordering system based on inventory level, the lead time is 10 daysa)Re-order level = 450 unitsb)Inventory carrying cost = 218c)Re-order level = 500 unitsd)Inventory carrying cost = 545Correct answer is option 'B,C'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of The demand of a machine is 600 units per month and ordering cost is 80 per order. The daily holding cost per unit inventory is 0.40. in the past two months the demand rate has gone as high as 50 units/day. For a re-ordering system based on inventory level, the lead time is 10 daysa)Re-order level = 450 unitsb)Inventory carrying cost = 218c)Re-order level = 500 unitsd)Inventory carrying cost = 545Correct answer is option 'B,C'. Can you explain this answer?, a detailed solution for The demand of a machine is 600 units per month and ordering cost is 80 per order. The daily holding cost per unit inventory is 0.40. in the past two months the demand rate has gone as high as 50 units/day. For a re-ordering system based on inventory level, the lead time is 10 daysa)Re-order level = 450 unitsb)Inventory carrying cost = 218c)Re-order level = 500 unitsd)Inventory carrying cost = 545Correct answer is option 'B,C'. Can you explain this answer? has been provided alongside types of The demand of a machine is 600 units per month and ordering cost is 80 per order. The daily holding cost per unit inventory is 0.40. in the past two months the demand rate has gone as high as 50 units/day. For a re-ordering system based on inventory level, the lead time is 10 daysa)Re-order level = 450 unitsb)Inventory carrying cost = 218c)Re-order level = 500 unitsd)Inventory carrying cost = 545Correct answer is option 'B,C'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice The demand of a machine is 600 units per month and ordering cost is 80 per order. The daily holding cost per unit inventory is 0.40. in the past two months the demand rate has gone as high as 50 units/day. For a re-ordering system based on inventory level, the lead time is 10 daysa)Re-order level = 450 unitsb)Inventory carrying cost = 218c)Re-order level = 500 unitsd)Inventory carrying cost = 545Correct answer is option 'B,C'. Can you explain this answer? tests, examples and also practice Mechanical Engineering tests.
Explore Courses for Mechanical Engineering exam

Top Courses for Mechanical Engineering

Explore Courses
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev