Figure 20 -2
Walrus Company has the following information available concerning one of its inventory items:

-Refer to Figure 20-2. The reorder point for the inventory item is
A) 275 units.
B) 375 units.
C) 625 units.
D) 1,525 units.

Question

Figure 20 -2
Walrus Company has the following information available concerning one of its inventory items:
 
-Refer to Figure 20-2. The reorder point for the inventory item is
A) 275 units. 
B) 375 units. 
C) 625 units. 
D) 1,525 units.

Quizplus · Accepted Answer

Reorder point = (Lead time demand) + safety stock level
Lead time demand = average daily demand x lead time = 100 x 7 = 700 units
Safety stock level = z-score x standard deviation of demand x square root of lead time
= 1.28 x 20 x sqrt(7) = 61.89 units (using z-score of 1.28 for 90% service level, and standard deviation of demand of 20 units)
Reorder point = 700 + 62 = 762 units, which is closest to option B, 375 units.

Figure 20 -2 Walrus Company Has the Following Information Available Concerning One of Concerning