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

question 86

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.A normal distribution table is appended to this exam.
-Use the information in Scenario 9.7.What is the cost of holding the safety stock necessary to maintain the 98% service level?

• A)less than or equal to $30
• B)greater than $30 but less than $40
• C)greater than $40 but less than $50
• D)greater than $50

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Definitions:

Sales Message

A communication that is designed to persuade a potential customer to purchase a product or service.

Smartest Business Decision

A highly intelligent or wise choice made in the context of business operations, usually leading to significant positive outcomes.

Full Refund

The total amount of money returned to a customer for a product or service that did not meet the expected standards or satisfaction.

Reduced Rate

A discounted price offered from the regular cost of goods or services.