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For a given product, the optimal order quantity is 600 units, average annual demand is 12,000 units, the average lead time is 1 month, and the optimal safety stock is 400 units. What is the average inventory level for this product

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tanseershar

Answer:

700 units

Explanation:

       No of orders per year=annual demand/optimal order quantity  

       No of orders per year=12,000/600=20

       Average orders per month=20/11=1.75

Average Inventory=1.75*400=700

Please note that 11 months are taken as 1 month is lead time therefore it is excluded for per month orders.                    

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