B) 93 Show The correct reorder point is 93. The reorder point reflects the amount of safety stock needed to cover the lead time for an order plus any random variation in demand. In other words, the business must place the order before running out of inventory so that new units arrive before they are needed. This problem presents a situation with demand variance (average daily demand of 25 with a standard deviation of 5) and a constant lead time (3 days). The following formula is used to calculate the reorder point when a specific service level is expected, demand variance exists, and there is a constant lead time: ROP = demand during lead time plus ZσdLT Demand during lead time is calculated by multiplying daily demand (25 marshmallow peeps) by lead time (3 days). 25 x 3 = 75. In this case, we also need to take into account the amount of safety stock necessary to cover any random variance in demand using the equation ZσdLT, where: Z - standard
z-score from normal distribution table (in this case z for 98% service level is 2.055) Thus, ZσdLT = 2.055(1.7325) = 2.055*8.66 = 17.8, which would be rounded to 18. The necessary safety stock is 18 marshmallow peeps. ROP = 25(3) + 18 Recommended textbook solutions
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Fundamentals of Financial Management, Concise Edition8th EditionEugene F. Brigham, Joel F Houston 799 solutions What is the formula to calculate the reorder point quizlet?The calculation for Q is = SQRT(2DS/H) where D is annual demand and S cost per order (setup cost). To calculate the reorder point you must calculate Dbar which tells you the amount of units used durig operting time in one day and then multiply this by the lead time.
What is the reorder point quizlet?Reorder point. the level of inventory at which a new order should be placed. Stockout. An inventory shortage. When the demand exceeds the available inventory in stock.
Which options would be considered when determining the reorder point for dental supplies?A reorder point is a pre-determined level of inventory that triggers a stock replenishment. Reorder points are calculated based on supplier lead times, the quantity you expect to use within that time, safety stock requirements, and the shelf life of the product.
Which one of these would not be a factor in determining the reorder point quizlet?The demand rate is not one of the factors used in determining the reorder point ROP. In fixed order-quantity inventory planning, the reorder point (ROP) can include safety stock held to account for demand variability.
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Which of the following helps to determine the reorder point of an item quizlet?
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