A Company Wants to Determine Its Reorder Point (R)

question 48

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. The company wants to have a service probability coverage of 95 percent. If average daily demand is 8, lead time is 3 days, and the standard deviation of usage during lead time is 2, which of the following is the desired value of R?

• A) About 17.9
• B) About 19.7
• C) About 24.0
• D) About 27.3
• E) About 31.2

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Definitions:

Planning

A phase of the management process whereby objectives are outlined and courses of action determined.

Managerial Accounting

The process of identifying, measuring, analyzing, and communicating financial information to managers for the purpose of achieving organizational goals.

Creativity and Change

The process of implementing new ideas, methods, or innovations to initiate or respond to organizational, environmental, or market shifts.

Planning

The process of setting goals, developing strategies, and outlining tasks and schedules to achieve the objectives set.