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

question 55

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. What combination of changes in lead-time and service level would result in exactly the same level of safety stock as indicated in the table?

• A) Lead-time drops to 41 days and service level increases to 99%.
• B) Lead-time increases to 18.52 days and service level drops to 92%.
• C) Lead-time increases to 20.54 days and service level drops to 90%.
• D) Lead-time drops to 3.5 days and service level increases to 99.54%.

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Definitions:

Rapid Reaction

The quick response or action taken in response to an event or set of circumstances.

Scatter Plot

A type of graph that illustrates the relationship between two variable quantities, with each pair of points plotted as coordinates on the Cartesian plane.

Time-Series Components

Distinct elements that constitute time-series data, typically including trend, seasonal, cyclical, and irregular components.

Quarterly Time Series

Data collected, distributed, or analyzed at intervals of three months, often used to identify trends over time.