A Company Wants to Determine Its Reorder Point (R)

question 28

Multiple Choice

A company wants to determine its reorder point (R) . Demand is variable and the company wants to build a safety stock into R. If the average daily demand is 12, the lead time is 5 days, the desired z value is 1.96, and the standard deviation of usage during lead time is 3, which of the following is the desired value of R?

• A) About 6
• B) About 16
• C) About 61
• D) About 66
• E) About 79

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Definitions:

Marginal Cost

The extra expenditure involved in generating an additional unit of a product or service.

Social Value

The importance or benefit that something has to society, which might not be reflected in its market price, such as education or environmental protection.

Resources

Assets, materials, and inputs used to produce goods and services, including natural resources, human resources, and capital.

Opportunity Cost

The cost of choosing one option over another, representing the value of the foregone alternative.