Question

The I-75 Carpet discount store has annual demand of 85,700 yards for Super Resistant carpet. The annual carrying cost for a yard of this carpet is $2.25 per yard and the ordering cost is $350. The store is open 52 weeks per year. Assume that the expected value of daily demand is 200, that the standard deviation for daily demand is 4 and that the lead time to fill an order is 11 days. Assume that the EOQ is 5164 yards. What would be the reorder point for a 95% service level?

Answer 1

2,421.89

Step-by-step explanation:

Reorder point = Daily demand*Lead time + Z*STANDARD DEVIATION *√(Lead time)

Reorder point = 300*8 + 1.65*4*√11

Reorder point = 2,400 + 21.8897

Reorder point = 2,421.8897

Reorder point = 2,421.89

So, the reorder point for a 95% service level is 2,421.89.