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 if $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
E) None of the above

Question

Quizplus · Accepted Answer

Using the formula for reorder point:

ROP = (Demand per day x Lead time) + Safety stock

First, calculate the demand per day:

Weekly demand = 10 pizzas
Days open per week = 5 days
Demand per day = Weekly demand / Days open per week
Demand per day = 10 pizzas / 5 days = 2 pizzas per day

Next, calculate the lead time:

Lead time = 4 days

Finally, calculate the safety stock:

Safety stock = 1 pizza

Plug these values into the ROP formula:

ROP = (2 x 4) + 1 = 9

Therefore, the optimal reorder point is 9 pizzas.

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