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Thomas' Bike Shop Stocks a High Volume Item That Has

question 73

Essay

Thomas' Bike Shop stocks a high volume item that has a normally distributed demand during the reorder period. The average daily demand is 70 units, the lead time is 4 days, and the standard deviation of demand during the reorder period is 15.
a. How much safety stock provides a 95% service level to Thomas?
b. What should the reorder point be?


Definitions:

Variance Report

A document that compares planned financial outcomes to actual financial outcomes, highlighting differences (variances) for analysis.

Materials Costs

These are the costs associated with the raw materials used in the manufacture of products or the provision of services.

Overtime

Additional hours worked beyond the standard working hours, often compensated at a higher pay rate than regular hours.

Rate Variance

Rate Variance is the difference between the standard cost and actual cost paid for something, often analyzed in budgeting to manage financial performance.

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