Central Perk orders their organic coffee filters from a South American supplier that mails them as inexpensively (hence,as slowly)as possible.Central Perk uses 80 filters a day with a standard deviation of 5 days.It would be disastrous if they ran out of these filters,years ago customers caught them using paper towels from the men's room and business suffered.They have set their service level at 99% in hopes of avoiding a similar situation.It takes a fortnight to receive a shipment and the standard deviation of the shipping time is two days.What is their reorder point?
A) 1120 filters
B) 1450 filters
C) 1490 filters
D) 1515 filters

Question

Quizplus · Accepted Answer

To calculate the reorder level, we need to consider the lead time demand and safety stock.

Lead time demand = demand per day * lead time = 80 * 14 = 1120

Safety stock = z * σ * √(lead time)

where z = the number of standard deviations associated with the desired service level
σ = standard deviation of demand during lead time

From the given data, we know that the service level is 99%, which corresponds to a z-value of 2.33.

σ = 5 (given)
lead time = 14 days (given)

Plugging in the values, we get:

Safety stock = 2.33 * 5 * √14 = 29.4

Reorder level = lead time demand + safety stock = 1120 + 29.4 = 1490

Therefore, the answer is (C) 1490 filters.

Central Perk Orders Their Organic Coffee Filters from a South