Question

1) A person is using the normal distribution to determine the safety stock for a product. If the weekly demand is N(40, 16) and the company wishes to maintain their 90 percent service level, approximately how much safety stock should be held given a one-week lead time?

Select one:

a. 21 units

b. 17 units

c. 9 units

d. 6 units

2) A person is using the normal distribution to determine the safety stock for a product. If the weekly demand is N(40, 16) and the company wishes to maintain their 90 percent service level, what is the approximate reorder point given a one-week lead time?

Select one:

a. 61 units

b. 46 units

c. 49 units

d. 57 units

Answer 1

1) N (40, 16) means the mean demand = 40 and variance = 16

Standard deviation = = = = 4

Weekly demand = d = 40 units

Standard deviation = = 4 units

Lead Time = 1 week

Service level = 90%

For Service level = 90%, Z value = 1.28

Safety stock = Z * * = 1.282 * 4 * = 5.128 = 6 units

Answer: d. 6 units

2) Reorder point = d * LT + Safety stock

Safety stock is found in question 1 above.

Reorder point = 40 * 1 + 6 = 46 units

Answer: b. 46 units

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