Question

The daily demand for Superco's grocery store for bananas is normally distributed with a mean of 60 and a standard deviation of 13.5. Additionally, the lead time for new shipments of bananas is 5 days. Superco's prior service levels were unsustainable, so now the company wants to reorder to maximize profit. It costs Superco $0.05 per banana to purchase and the store sells the bananas for $0.20 each. Additionally, spoiled bananas are considered worthless. Unsold bananas can last for 2 days have a daily holding cost of 40%. What is the optimal reorder point for bananas at Superco? Group of answer choices a) 312 b) 319 c) 311 d) 300

Answer 1

Here, Optimal Reorder point is Average Daily Demand*Replenishment Lead Time Plus Safety Stock

given that Average Daily Demand is 60, Replenishment Lead time is 5 Days

Optimal Reorder Point = 60*5 = 300 without consideration of Safety stock

Hence, correct answer is d) 300