Scenario 9.11 Demand = 50,000 Units/week

question 8

Multiple Choice

Scenario 9.11
Demand = 50,000 units/week
Standard deviation of weekly demand = 15,000 units
Average lead time = 8 weeks
Standard deviation of lead time: 3 weeks
Cycle-service level = 80%
A continuous review system is used to control inventory.
-Use the information in Scenario 9.11. If the firm decides to increase its cycle-service level to 90%, what is the new reorder point if all other parameters remain the same for this product?

• A) greater than 550,000 units
• B) greater than 400,000 units but less than or equal to 550,000 units
• C) greater than 250,000 units but less than or equal to 400,000 units
• D) greater than 150,000 units but less than or equal to 250,000 units
• E) greater than 0 but less than or equal to 150,000 units

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Definitions:

Long-Term Liabilities

Obligations that are not due or payable for a long time, usually for more than a year.

Net Sales

The total revenue from sales reduced by returns, allowances, and discounts.

Gross Profit

The difference between sales revenue and the cost of goods sold, before deducting overhead, payroll, taxation, and interest payments.

Cost of Goods Sold

The total direct costs incurred in producing goods which are sold, including materials and labor.