The College of Business at MSU uses an average of 50 boxes of copier paper a day

Question

The College of Business at MSU uses an average of 50 boxes of copier paper a day. The college operates 275 days a year. Storage and handling costs for the paper are $25 a year per box, and it costs approximately $50 to order and receive a shipment of paper. It takes 5 days to receive a new box of paper. When should the Dean's Office reorder copy paper?

A. When there are 2500 boxes of paper left in the office.

B. When there are 1375 boxes of paper left in the office.

C. When there are 250 boxes of paper left in the office.

D. When there are 400 boxes of paper left in the office.

Explanation / Answer

usage is entirely constant and lead time is known with certainty, the order point is equal to daily usage multiplied by lead time:

Order point = Daily usage x Lead time

Order Point = 50*5=250

Option C is right

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