A Company Wants to Determine Its Reorder Point (R)

question 84

Multiple Choice

A company wants to determine its reorder point (R) .Demand is variable and they want 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:

Direct Materials Cost

The cost of raw materials that are directly traceable to the manufacturing of a product.

Break-Even Point

The level of production or sales at which total revenues equal total expenses, resulting in no net loss or gain.

Insurance Premiums

Regular payments made to an insurance company to maintain insurance coverage for health, life, property, or other policies.

Fixed Costs

Expenses that do not change with the level of production or sales activities within a certain range or period.