Judith Thompson, the manager of the student center cafeteria, has added pizza to the menu.The pizza is ordered frozen from a local pizza establishment and baked at the cafeteria.Judith anticipates a weekly demand of 10 pizzas.The cafeteria is open 45 weeks a year, 5 days a week.The ordering cost is $15 and the holding cost is $0.40 per pizza per year.The pizza vendor has a 4-day lead-time and Judith wants to maintain 1 pizza for safety stock.What is the optimal reorder point?
A)10
B)8
C)4
D)9

Question

Quizplus · Accepted Answer

The optimal reorder point can be calculated using the following formula:
Reorder point = (Demand during lead time) + Safety stock

Demand during lead time = Weekly demand/5 days x lead time 
= 10/5 x 4 
= 8 pizzas

Safety stock = 1 pizza

Reorder point = 8 + 1 
= 9 pizzas

Therefore, the optimal reorder point is 9 pizzas, which is choice D.

Judith Thompson, the Manager of the Student Center Cafeteria, Has