Thank you for visiting Demand for 2 ounce potato chip bags is normally distributed The average demand during the lead time is 80 000 bags with a variance during. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
The most likely reorder point for the 2-ounce potato chip bags with a desired service level of 99.8% is 80,288 bags.
To calculate the most likely reorder point with a desired service level of 99.8%, we must first determine the safety stock and then add it to the average demand during the lead time.
1. Calculate the safety stock: To do this, we'll need to find the Z-score that corresponds to a 99.8% service level. The Z-score is approximately 2.88 for 99.8%. Next, we take the square root of the variance during the lead time, which is √10,000 = 100.
Multiply the Z-score by the standard deviation: 2.88 x 100 = 288 bags.
2. Determine the average demand during the lead time: This is given as 80,000 bags.
3. Calculate the reorder point: Add the safety stock (288 bags) to the average demand during the lead time (80,000 bags): 80,000 + 288 = 80,288 bags.
The most likely reorder point for the 2-ounce potato chip bags with a desired service level of 99.8% is 80,288 bags.
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