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Business Arithmetic — Entrepreneurship STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceEntrepreneurshipBusiness Arithmetic3 Marks
Question
What do you mean by Reorder Point? How it is calculated?
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Answer

It is a level at which a new order must be placed so that the inventory is renewed Süme before the stock reaches zero level. It is estimated by using the formula:
Reorder point = Usage Rate Lead × Time
Example: Suppose a company uses 15 units of an item per day (usage rate, and the order lead time is 10 days, a new order must be placed when the inventory level reaches 150 units
(Reorder point 150 = Usage Rate 15 × 10) so that inventory is replenished before a stock out occurs.

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