Question

	Problem B
	Peerless Pies makes various kinds of pie, including pumpkin pies. The demand for pumpkin pies varies, based
	on time of year and other factors. The company wants to determine the reorder point for pumpkins.
	Average pounds of pumpkins needed				60	pounds per week
	Standard deviation of demand				4	pounds per week
	Customer service level desired				97.5%
	Lead time				2	weeks
3	What amount of safety stock is appropriate?
4	Determine the reorder point. (Round up if necessary.)
5	Identify whether the following statements are true or false.
	a	The amount calculated in Question 3 represents the number of pounds of pumpkins that Peerless Pies orders at the reorder point.
	b	The amount calculated in Question 3 represents the number of pounds of pumpkins that Peerless Pies has on hand at the reorder point.
	c	The amount calculated in Question 3 represents the number of pounds of pumpkins that Peerless Pies has on hand when a pumpkin order is received from the supplier.
	d	The amount calculated in Question 4 represents the number of pounds of pumpkins that Peerless Pies orders at the reorder point.
	e	The amount calculated in Question 4 represents the number of pounds of pumpkins that Peerless Pies has on hand at the reorder point.
	f	The amount calculated in Question 4 represents the number of pounds of pumpkins that Peerless Pies has on hand when a pumpkin order is received from the supplier.

Answer 1

3. As per the data provided in the question the safety stock should be 120 pounds I.e, 60pounds×2weeks .

4.The re order point should be fixed at 240 pounds I.e, 60pounds×2weeks = 120 pounds + 120 pounds of safety stock which will be 240 pounds.  

The above computation is done with the available information and no other information is available.

5. A. The given statement is incorrect as safety stock is which tthe firm holds in order to overcome stock out situation and this is not the stock as on re order point.

5.B.Re order point is different and safety stock is different and the given statement is falseas there will be more stock at time of re order point.

5.C.Yes the given statement is true as it is the estimated stock to be held at the time of receipt of supply from the supplier.

5.D.The given statement is incorrect as it is not the quantity which will be ordered at re order point.

5.E.The given statement is correct. Re order point is the point at which the firm places the order for further stock requirements.

5 .F. The given statement is incorrect and it is suitable for safety stock and not the order point.