The manager of the Quick Stop Corner convenience store (which is open 360 days per year) sells four cases of Stein soda each day (1440 cases per year). Order costs are $8.00 per order. The lead time for an order is three days. Annual holding costs are equal to $57.60 per case.
-What is the reorder point for Stein soda?
A) 4 cases
B) 8 cases
C) 12 cases
D) 16 cases

Question

Quizplus · Accepted Answer

The reorder point is the level of inventory at which a new order should be placed to avoid stockouts. The formula for reorder point is (average daily demand x lead time in days) + safety stock. Since the average daily demand is 2 cases and the lead time is 6 days, the total demand during lead time would be 12 cases. We also need to consider safety stock, which is the buffer stock to account for unexpected demand or delays. Let's say we want a safety stock of 2 cases. Therefore, the reorder point would be (2 x 6) + 2 = 14 cases. However, we can only order in whole numbers of cases, so we round down to the nearest whole number, which is 12 cases. Thus, the best choice is C) 12 cases.

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