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Moriah’s Candle Company manufactures candles. The company buys wax in 45-Kilogram containers that cost $17 each....

Moriah’s Candle Company manufactures candles. The company buys wax in 45-Kilogram containers that cost $17 each. The company uses 25,000 containers per year, and usage occurs evenly throughout the year. The average cost to carry a 45-Kilogram container in inventory per year is $3, and the cost to place an order is $9. The company works 250 days per year.

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The lead time is 4 working days and the average rate of usage is 60 containers per day. What is the reorder point?

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Answer #1
Annual demand (D) = 25000
Carrying cost perunit per annum (C ) = $3.00
Ordering cost per order (O) = 9 per order
EOQ = (2DC / O)^2
(2*25000*3/9)^2 = 129 units
Reorder Point = Reorder qty (EOQ) + Lead time consumption
129 units + (Lead time*Average consumption per day)
129 + (4*60) = 369 units
Answer is 369 units
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