Question

The monthly consumption of an item costing Rs. 12 is estimated at 400 pieces. The carrying cost is 1.5 percent per month and the procurement cost per order is Rs. 36. Lead time is 1 month, review period is 1 month and Safety stock is equal to half month’s consumption. (a) What would be the reorder quantity if the stock on hand at first review is 600? (b) What would be the reorder at second review quantity, if the stock on hand is 200 at second review and the quantity ordered at first review is yet to be received?

Answer 1

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