Answer the following questions using the information below:
Manama Optical Company sells optical equipment. Lens Company manufactures special glass lenses. Manama Optical Company orders 5,200 lenses per year, 100 per week, at $20 per lens. Lens Company covers all shipping costs. Manama Optical Company earns 30% on its cash investments. The purchase-order lead time is 2.5 weeks. Manama Optical Company sells 125 lenses per week. The following data are available:
Relevant ordering costs per purchase order $21.25
Relevant insurance, materials handling, breakage,
and so on, per year $ 2.50
-What is the reorder point?
A) 220.5 lenses
B) 397.5 lenses
C) 312.5 lenses
D) 415.5 lenses

Question

Quizplus · Accepted Answer

The reorder point is calculated based on the demand during the lead time. Since Manama Optical Company sells 125 lenses per week and the purchase-order lead time is 2.5 weeks, the reorder point is 125 lenses/week * 2.5 weeks = 312.5 lenses.

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