CIPS Exam L4M7 Topic 3 Question 25 Discussion

Actual exam question for CIPS's L4M7 exam

Question #: 25
Topic #: 3

[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 Layla at Dec 10, 2023, 06:36 AM

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