The manager of the Quick Stop Corner Convenience Store (which never closes)sells four cases of Stein beer each day.Order costs are $20.00 per order,and Stein beer costs $8.00 per six-pack (each case of Stein beer contains four six-packs).Orders arrive three days from the time they are placed.Daily holding costs are equal to five percent of the cost of a Stein beer case. Without allowing for safety stock,what reorder point should be used to reorder Stein beer?
A)0 cases remaining
B)4 cases remaining
C)12 cases remaining
D)16 cases remaining
E)20 cases remaining

Question

Quizplus · Accepted Answer

To find the reorder point, we need to consider two types of costs: ordering costs and holding costs.
Ordering cost = $20.00 per order
Holding cost = 5% of the cost of a Stein beer case = 0.05 x (8 x 4 x 6) = $9.60 per case per day

We can use the following formula to calculate the reorder point:
Reorder point = lead time demand + safety stock

Lead time demand = daily demand x lead time
Daily demand = 4 cases
Lead time = 3 days
Lead time demand = 4 x 3 = 12 cases

Safety stock is the extra inventory held to protect against stockouts due to uncertainties in demand or lead time. Without any information about these uncertainties, we cannot determine the safety stock. Therefore, we assume that the safety stock is zero.

Reorder point = 12 + 0 = 12 cases

So, when the inventory reaches 12 cases remaining, the manager should place an order for Stein beer to arrive in three days.

The Manager of the Quick Stop Corner Convenience Store (Which