Table $5.7$
Demand $= 5200$ units/year
Standard deviation of weekly de mand $= 11$ units
Ordering costs $= \$ 45 /$ order
Holding costs $= \$ 2 /$ unit/year
Cycle-service level $= 90 \% ($ z for $90 \% = 1.28 )$
Lead time $= 3$ weeks
Number of weeks per year $= 52$ weeks
-Use the information in Table 5.7. If a firm uses the continuous review system to control the inventory, what would be the reorder point?
A) 0 units
B) greater than 0, but less than or equal to 300 units
C) greater than 300 but less than or equal to 600 units
D) greater than 600 units

Question

Table $5.7$
Demand $= 5200$ units/year
Standard deviation of weekly de mand $= 11$ units 
Ordering costs $= \$ 45 /$ order
Holding costs $= \$ 2 /$ unit/year
Cycle-service level $= 90 \% ($ z for $90 \% = 1.28 )$ 
Lead time $= 3$ weeks
Number of weeks per year $= 52$ weeks
-Use the information in Table 5.7. If a firm uses the continuous review system to control the inventory, what would be the reorder point?
A) 0 units
B) greater than 0, but less than or equal to 300 units
C) greater than 300 but less than or equal to 600 units
D) greater than 600 units

Quizplus · Accepted Answer

The reorder point is calculated as the demand during lead time plus safety stock. Demand during lead time is $ \frac{5200}{52} \times 3 = 300 $ units. Safety stock is $ 1.28 \times 11 \times \sqrt{3} \approx 24.4 $ units. Thus, the reorder point is approximately $ 300 + 24.4 = 324.4 $ units, which falls in the range greater than 300 but less than or equal to 600 units.

Table 5.75.75.7 Demand =5200= 5200=5200 Units/year Standard Deviation of Weekly De Mand =11= 11=11

Table $5.7$ Demand $= 5200$ Units/year
Standard Deviation of Weekly De Mand $= 11$