Question

The demand of a certain part is 1000 parts/year and its cost is ₹1000/part. The orders are placed using EOQ. The ordering cost is ₹100/order and the lead time is 5 days. If the holding cost is ₹20/part/year, the inventory level for placing the orders is ________________ parts (round off to the nearest integer).

Hint:

Reorder level depends only on consumption rate and lead time—not on EOQ itself.

Answer 1

Correct Answer: 13

To find the reorder level, use:
\[ \text{Reorder Level} = \text{Daily Demand} \times \text{Lead Time} \] Annual demand = 1000 parts
Working days = 365 days
Daily demand:
\[ d = \frac{1000}{365} \approx 2.74 \text{ parts/day} \] Lead time = 5 days
\[ \text{Reorder Level} = 2.74 \times 5 = 13.7 \approx 14 \] Thus, an order should be placed when inventory reaches:
\[ \boxed{14} \]