A particular brand of soap has a lead time of three weeks to reorder,a weekly standard deviation of ten units and a weekly average usage of 30 units.The reorder point for this soap,assuming a 95% service level (z = 1.645),is:

Question

Quizplus · Accepted Answer

The formula to calculate reorder point is:

Reorder Point = (Lead Time Demand) + Z-score x √(Lead Time) x Standard Deviation

Where:
Lead Time Demand = Average Usage during lead time
Z-score = 1.645 (for 95% service level)
Lead Time = 3 weeks
Standard Deviation = 10 units

Substituting the given values in the formula:

Reorder Point = (30 units/week x 3 weeks) + 1.645 x √(3 weeks) x 10 units/week
Reorder Point = 90 units + 16.45 units
Reorder Point = 106.45 units

Therefore, the correct choice is D.

A Particular Brand of Soap Has a Lead Time of Three