Compute the reorder point when weekly demand is 100 units,lead time is 2 weeks,the desired service level is 98% (which corresponds to 2.06 standard deviations from the mean)and the standard deviation of demand during lead time is 30 units.
A)125 units
B)262 units
C)75 units
D)187 units

Question

Quizplus · Accepted Answer

The reorder point is calculated as the sum of the product of average demand during lead time and the safety stock. Here, average demand during lead time = 100 units/week * 2 weeks = 200 units. Safety stock = standard deviations from the mean (Z) * standard deviation of demand during lead time = 2.06 * 30 = 61.8 units. So, reorder point = 200 + 61.8 = 261.8 units, which rounds to 262 units.

Compute the Reorder Point When Weekly Demand Is 100 Units,lead