Reorder Point Shorts Company manufactures backpacks. A heavy-duty strap is one part that the company orders...
Reorder Point
Shorts Company manufactures backpacks. A heavy-duty strap is one part that the company orders from an outside supplier. Information pertaining to the strap is as follows:
| Economic order quantity | 6,300 units |
| Average daily usage | 315 units |
| Maximum daily usage | 375 units |
| Lead time | 4 days |
Required:
1. What is the reorder point assuming no safety stock is carried?
units
2. What is the reorder point assuming that safety stock is carried?
units
Homework Answers
(1)
reorder point assuming no safety stock is carried = lead time x average daily sales
= 4 x 315
= 1260 units
(2)
reorder point assuming that safety stock is carried = reorder level + safety stock
= 1260 + 240
= 1500 units
where,
safety stock = lead rime x (maximum daily usage - average daily usage)
= 4 x (375 - 315) = 240
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