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
[Reference: CIPS study guide page 112-114, LO 2, AC 2.3]
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