HighLife Corporation Has the Following Information: Average Demand = 30

question 6

Multiple Choice

HighLife Corporation has the following information: Average demand = 30 units per day
Average lead time = 40 days
Item unit cost = $45 for orders of less than 400 units
Item unit cost = $40 for orders of 400 units or more
Ordering cost = $50
Inventory carrying cost = 15 percent
The business year is 300 days.
Standard deviation of demand during lead time = 90
Desired service level = 95 percent
What is the safety stock that HighLife Corporation should carry for its desired service level of 95 percent?
1) 28 standard deviations cover 90 percent
1) 65 standard deviations cover 95 percent
1) 96 standard deviations cover 97.5 percent

• A)149
• B)90
• C)86
• D)112

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Definitions:

Asset

An item of value owned by an individual or corporation that is expected to provide future economic benefits.

Adjusting Entry

A journal entry made in accounting records to update the book values of certain assets or liabilities to their correct amounts.

Principal

The original sum of money borrowed in a loan or the initial amount of investment before any earnings or interest is added.

Interest

The charge for borrowing money or the compensation paid to a lender by a borrower for the use of borrowed funds.