Southeastern Bell stocks a certain switch connector at its central warehouse for

Question

Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 16 comma 00016,000 units. Southeastern estimates its annual holding cost for this item to be $2323 per unit. The cost to place and process an order from the supplier is $7373. The company operates 300300 days per year, and the lead time to receive an order from the supplier is 33 working days.

d) What is the reorder point? (round your response to the nearest whole number)

Explanation / Answer

Annual demand = 16000 units

Number of days in a year = 300 days

Daily demand = Annual demand / number of days in a year

= 16000/300

= 53.33 or rounded to 53 units

Lead time = 33 days

d) Reorder point = Daily demand x Lead time

= 53 x 33

= 1749 units

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