Cartwright 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. Cartwright 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

Quizplus · Accepted Answer

The reorder point is calculated as the lead time demand. With a constant production and a lead time of 1 week, the weekly demand is 2,600 packages per year divided by 52 weeks, which equals 50 packages.

Cartwright Graphics Uses a Special Purpose Paper on 80% of Its