To Take into Consideration Demand Uncertainty in Reorder Point (R)

question 34

Multiple Choice

To take into consideration demand uncertainty in reorder point (R) calculations, what do we add to the product of the average daily demand and lead time in days when calculating the value of R?

• A) The product of average daily demand times a standard deviation of lead time
• B) A z value times the lead time in days
• C) The standard deviation of vendor lead time times the standard deviation of demand
• D) The product of lead time in days times the standard deviation of lead time
• E) The product of the standard deviation of demand variability and a z-score relating to a specific service probability

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Definitions:

Credit Sales

Sales made by a business where the customer is allowed to pay at a later date.

Bad Debt Expense

A charge to the income statement for accounts receivable that a company has determined it will not collect.

Adjusting Entry

An entry made in the books of accounts at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.

Credit Sales

Transactions involving the transfer of goods or services to a customer with the agreement that payment will be made at a later date.