CIPS Exam L4M7 Topic 2 Question 40 Discussion

Actual exam question for CIPS's L4M7 exam

Question #: 40
Topic #: 2

[All L4M7 Questions]

Which of the following is the formula for calculating the re-order level?

AAverage usage in a lead-time / Required level of safety stock

BRequired level of safety stock x Average usage in a lead-time.

CRequired level of safety stock -- Average usage in a lead-time

DAverage usage in a lead-time + Required level of safety stock

Show Suggested Answer

Suggested Answer: D

In management accounting, reorder level (or reorder point) is the inventory level at which a com-pany would place a new order or start a new manufacturing run.

Reorder level depends on a company's work-order lead time and its demand during that time and whether the company maintain a safety stock.

If a company maintains a safety stock, reorder level calculation changes are follows:

Reorder Level = Average Demand Lead Time + Safety Stock

LO 2, AC 2.3

by Angelica at Jul 17, 2024, 06:55 PM

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Annamaria

4 months ago

Haha, I hope the exam doesn't have too many trick questions like this. I'll go with B, just to be on the safe side.

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Jean

3 months ago

Yeah, I agree. Let's go with B for the formula.

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Alease

3 months ago

I think it's B too, better safe than sorry.

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Delmy

4 months ago

Hmm, this is a tricky one. I'm leaning towards B, but I may need to double-check my inventory management formulas.

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Joanna

4 months ago

B is the way to go. Multiplying the two key factors is the classic reorder level calculation.

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Tonja

3 months ago

That's right, it's important to use the correct formula to ensure efficient inventory management.

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Wilbert

4 months ago

Yes, multiplying the required level of safety stock by the average usage in a lead-time gives you the re-order level.

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Oneida

4 months ago

I agree, B is the correct formula for calculating the re-order level.

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Christiane

4 months ago

I'm going with D. Adding the average usage and safety stock seems more intuitive.

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Eugene

3 months ago

I believe D is the correct formula. Adding average usage and safety stock seems logical to me.

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Hannah

3 months ago

I'm not sure, but I think C might be the formula for re-order level calculation.

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Alishia

3 months ago

I agree with you, B seems like the right choice for calculating re-order level.

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Bettina

4 months ago

I think B is the correct formula. Multiplying safety stock by average usage makes more sense.

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Theron

5 months ago

I'm not sure, but I think it's A) Average usage in a lead-time / Required level of safety stock.

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Talia

5 months ago

I disagree, I believe the answer is D) Average usage in a lead-time + Required level of safety stock.

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Ryann

5 months ago

Option B looks like the right formula to me. Safety stock multiplied by average usage in lead-time seems logical.

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Virgie

4 months ago

Yeah, that formula seems most logical for calculating the re-order level.

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Sanda

4 months ago

I think option B is correct too. It makes sense to multiply safety stock by average usage in lead-time.

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Beatriz

5 months ago

I think the answer is B) Required level of safety stock x Average usage in a lead-time.

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