Scenario 9.7 Cranium, Inc., Purchases Term Papers from an Overseas Supplier Under

question 204

Multiple Choice

Scenario 9.7
Cranium, Inc., purchases term papers from an overseas supplier under a continuous review system. The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day. It costs $60 to process each order and there is a five-day lead-time. The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level. Cranium operates 200 days per year.
-Use the information in Scenario 9.7. What is the reorder point R to satisfy a 98% cycle-service level?

• A) less than or equal to 1,500 units
• B) greater than 1,500 units but less than or equal to 1,600 units
• C) greater than 1,600 units but less than or equal to 1,700 units
• D) greater than 1,700 units

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Definitions:

Market Definition

The process of characterizing the boundaries of a market, including potential customers and competing products, to understand its dynamics and size.

Effective

Having the intended or expected outcome; the ability to achieve specific goals or results.

Fixed

Costs or expenses that do not change with the level of goods or services produced within a certain time period.

Share Building

The process of increasing a company's market share through strategies like marketing, sales promotion, and product innovation.