company wants to determine its reorder point (R).Demand is variable and they want to build a safety stock into R.If the average daily demand is 12,the lead time is 5 days,the desired "z" value is 1.96,and the standard deviation of usage during lead time is 3,which of the following is the desired value of R?
A)About 6
B)About 16
C)About 61
D)About 66
E)About 79

Question

Quizplus · Accepted Answer

The reorder point (R) is calculated as: R = (Average daily demand * Lead time) + (z * Standard deviation of usage during lead time). So, R = (12 * 5) + (1.96 * 3) = 60 + 5.88 ≈ 66.

Company Wants to Determine Its Reorder Point (R)