Given that the minimum and average stock levels for raw materials are 4,000 and 9,000 units respectively, calculate the reorder quantity.
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Answer: C. 10,000 units
Explanation
Average stock equals minimum stock plus half of the reorder quantity. Substituting the given numbers gives 9,000 equals 4,000 plus half of reorder quantity. Solving this inventory formula results in a reorder quantity of 10,000 units. Inventory formulas help supply chain managers maintain optimal stock levels. Minimum stock represents the safety buffer required to prevent stockouts. Reorder quantity determines the batch size of raw material replenishment orders.
Manufacturing companies use these calculations to minimize holding and ordering costs. Proper inventory planning prevents production delays caused by raw material shortages. Supply chain analysts review stock parameters regularly to match shifting demand. Option A is incorrect because 8,000 units fails to satisfy the average stock formula. Option B is wrong since 11,000 units yields an incorrect mathematical result. Option D is incorrect because 9,000 units represents the average stock value.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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