If the supply lead time is certain and demand during the lead time is constant, a company would be able to set a reorder level such that it used the last item just as a new order arrived thus reducing holding costs to a minimum. The reorder level to do this is found as:

Q. If the supply lead time is certain and demand during the lead time is constant, a company would be able to set a reorder level such that it used the last item just as a new order arrived thus reducing holding costs to a minimum. The reorder level to do this is found as:

A.            Maximum demand for the material item per day/week × Maximum supply lead time in days/weeks

B.            Demand for the material item per day/week × Lead time in days/weeks

C.            Both A&B

D.            None

Answer: Demand for the material item per day/week × Lead time in days/weeks