Which term is the level at which new orders are placed?

Which term is the level at which new orders are placed?

• A. Re-Order Level
• B. Lead Time
• C. Fixed Costs
• D. Total Costs

Answer: (A)

Reorder level is the stock level at which a new purchase is triggered. When inventory falls to this point, an order is placed to replenish stock so you don’t run out, especially while waiting for the supplier to deliver (the lead time). Lead time measures how long that wait is, not the level that triggers ordering. Fixed costs are the constant overhead costs, and total costs combine all costs together. So the term that describes the level at which new orders are placed is the reorder level.

Reorder level is the stock level at which a new purchase is triggered. When inventory falls to this point, an order is placed to replenish stock so you don’t run out, especially while waiting for the supplier to deliver (the lead time). Lead time measures how long that wait is, not the level that triggers ordering. Fixed costs are the constant overhead costs, and total costs combine all costs together. So the term that describes the level at which new orders are placed is the reorder level.