Reorder Point

Sterling Corporation has an EOQ of 5,000 units. The company uses an average of 500 units per day. An order to replenish the part requires a lead time of five days.

Required:

1. Calculate the reorder point, using (Reorder point = Rate of usage x Lead time). units

2. Select the graph that displays the appropriate reorder point.

a.	b.
c.	d.

Correct answer is .

3. What if the average usage per day of the part is 500 units but a daily maximum usage of 575 units is possible? What is the reorder point when this demand uncertainty exists?

units