Question

(URGENT) PoMA annually consumes 10,000 units of component P. The carrying cost of this component is Rs.2 per unit per year and the ordering costs are Rs.100 per order. PoMA uses an order quantity of 500 units. The company operates 200 days per year, and the lead time for ordering component P is 14 days. What is the re-order point (in terms of units)?

Answer 1

No of Units of Consumption	A	Given	10000
Carrying cost (per unit)	B	Given	2
Ordering cost (per order)	C	Given	100
Ordering Quantity units (per order)	D	Given	500
No of days in a year	E	Given	200
Lead Time (Days)	F	Given	14
Average Daily Demand (Units) = Total Consumption/ No. of Days	G	A/E	50
Re-order Point (Units)/EOQ= √2AO/C		√[(2*A*C)/B]	1000
√[(2*10000*100)/2]
OR
Lead Time Demand (Units) = Lead time x Average daily sales	H	F*G	700
Safety stock level = Avg daily orders x Avg lead time)	I	F*G	700
Reorder Point (ROP) = Demand during lead time + safety stock		H+I	1400

Note : Any method can be used though answer is different.