Answer:
a.) reorder point = 2,640 units
b.) reorder point = 5,280 units (reorder point doubles)
c.) reorder point = 1,320 units (reorder point drops in half)
Explanation:
Reorder point is the inventory level (point) at which action is taken (order placed) to replenish the stocked item. It is calculated as follows:
Reorder point = (Lead time × average daily sales) + safety stock
Lead time = 24 days
average daily sales = 110 units
safety stock = 0 (not given)
a.) reorder point = (Lead time × average daily sales) + safety stock
reorder point = (24 × 110) + 0 = 2,640 units
b.) if demand during lead time doubles:
lead time = 24 days
average daily sales = (110 × 2) = 220
∴ reorder point = 220 × 24 = 5,280 units
Therefore the reorder point doubles
c.) if demand during lead time drops in half:
lead time = 24 days
average daily demand = (110 ÷ 2) = 55 units
∴ reorder point = 24 × 55 = 1,320 units
Therefore the reorder point drops in half.
