A company annually consumes 10,000 units of Part C.The carrying cost of this part is $2 per year and the ordering costs are $100.The company uses an order quantity of 500 units.If the company operates 200 days per year,and the lead time for ordering Part C is 5 days,what is the order point?
A)250 units
B)1,000 units
C)500 units
D)2,000 units

Question

Quizplus · Accepted Answer

The order point formula is: (Daily usage rate) x (Lead time in days). The daily usage rate is 10,000 units / 200 days = 50 units per day. The lead time is 5 days. Therefore, the order point is 50 units/day * 5 days = 250 units.

A Company Annually Consumes 10,000 Units of Part C