Use the following information to answer the following Questions
Dazzle Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased in 100-sheet packages at a cost of $100 per package. Management estimates that the cost of placing and receiving a typical order is $15, and the annual cost of carrying a package in inventory is $1.50. Dazzle uses 2,600 packages each year. Production is constant, and the lead time to receive an order is 1 week.

-The reorder point is:
A) 25 packages.
B) 50 packages.
C) 100 packages.
D) 203 packages.
E) 225 packages.

Question

Use the following information to answer the following Questions
Dazzle Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased in 100-sheet packages at a cost of $100 per package. Management estimates that the cost of placing and receiving a typical order is $15, and the annual cost of carrying a package in inventory is $1.50. Dazzle uses 2,600 packages each year. Production is constant, and the lead time to receive an order is 1 week.

-The reorder point is:
A) 25 packages.
B) 50 packages.
C) 100 packages.
D) 203 packages.
E) 225 packages.

Quizplus · Accepted Answer

The reorder point is calculated based on the demand during the lead time. Since Dazzle uses 2,600 packages each year and there are 52 weeks in a year, the weekly usage is 2,600 / 52 = 50 packages. Given that the lead time to receive an order is 1 week, the reorder point is the weekly usage, which is 50 packages.

Use the Following Information to Answer the Following Questions