Question

In: Accounting

Marley Company uses 800 yards of material each day to make baseball caps. It usually takes...

Marley Company uses 800 yards of material each day to make baseball caps. It usually takes 5 days to receive the material from the supplier once an order is placed. Marley's desired safety stock is 2,400 yards. What is Marley's reorder point?

2,400

3,200

4,000

6,400

The data used to calculate the reorder point includes all of the following except:

the cost of placing an order

the rate at which which the material will be used.

the estimated time between placing an order and receipt of that order.

the minimum level of inventory needed to protect against stockouts.

If Dublin Industries want to maintain a customer service level of 97%, they must be willing to accept a _________ risk of stockout.

97%

1.9

3%

Need more information to answer the question.

A stockout would occur when demand during lead time is _____________ than the __________.

less than; order quantity

greater than; safety stock

greater than; inventory on hand

less than; lead time

Other things being equal, an increase in lead time for inventory orders will result in ___________.

a decrease in the order size

an increase in the reorder point

a decrease in order frequency

a decrease in the reorder point

Expert Solution

1. Safety stock is 2400 yards.

average daily stock = 800 yards

lead time = 5 days.

Reorder point = Safety stock + avg. daily stock x lead time.

Reorder point = 2400 + 800 x 5

Reorder point = 2400 + 4000

Reorder point = 6400 yards.

Therefore, Option D is correct.

2. The data used to calculate the reorder point includes, the rate at which the material will be used, the estimated time between placing the order and its receipt; the minimum level of inventory to protect against stockouts. Therefore, it doesn't include the cost of placing an order.

Therefore, Option A is correct.

4. A stockout would occur when demand during lead time is greater than the inventory on hand.

Therefore, option C is correct.

5. Other things being equal, an increase in lead time for inventory orders will result in an increase in the reorder point because, there will be requirement to hold more stock.

Therefore, Option B is correct.

ekkarill92 answered 2 years ago

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