Question

4. Average daily demand for a product is normally distributed with a mean of 40 units and a standard deviation of 8 units. Lead time is fixed at 30 days. What reorder point provides for a service level of 95 percent (z=1.65)? (2 points)

Answer 1

1236.15

Explanation:

Data provided

Daily demand (d) = 40 units

Standard deviation = 8 units

Lead time (L) = 30 days

The Service level of 95 percent z value = 1.65

The computation of the reorder point is shown below:-

Reorder point = demand during lead time + safety stock

`= daily\ demand * Lead\ time + z* \sigma* √(L)`

`= 40 * 30 + 1.65* 4* √(30)`

= 1236.149689

or

= 1236.15

Therefore the correct answer is 1236.15