Scenario 9.7 Cranium, Inc., Purchases Term Papers from an Overseas Supplier Under

question 109

Multiple Choice

Scenario 9.7
Cranium, Inc., purchases term papers from an overseas supplier under a continuous review system. The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day. It costs $60 to process each order and there is a five-day lead-time. The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level. Cranium operates 200 days per year.
-Use the information in Scenario 9.7. If lead-time increases by three days, what is the reorder point needed to maintain a 98% service level?

• A) less than or equal to 2,400 units
• B) greater than 2,400 units but less than 2,500 units
• C) greater than 2,500 units but less than 2,600 units
• D) greater than 2,600 units

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Definitions:

Old Memories

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A loss of memory due to brain injury, disease, or psychological trauma, affecting one's ability to recall past experiences.

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A part of the brain located in the frontal lobe, associated with decision making, social behavior, personality, and cognitive planning.