Question

A company has recorded the last five days of daily demand on their only product. Those values are 120, 125, 124, 128, and 133. The time from when an order is placed to when it arrives at the company from its vendor is 5 days. Assuming the basic fixed-order quantity inventory model fits this situation and no safety stock is needed, which of the following is the reorder point (R)?
A. 120.
B. 126.
C. 630.
D. 950.
E. 1,200.

Answer 1

Answer:

The correct option is C. 630.

Explanation:

From the question, can have the following:

Lead time in days = 5 days

Average daily sales = (120 + 125 + 124 + 128 + 133) / Lead time = 630 / 5 = 126

Since the basic fixed-order quantity inventory model fits this situation and no safety stock is needed, the reorder point (R) can be calculated as follows:

Reorder point (R) = Average daily sales * average lead time in days = 126 * 5 = 630

Therefore, the correct option is C. 630.