Question

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. At what point should he reorder Stein beer?

Answer 1

Answer:

At 12 cases the stein beer should reordered by him.

Explanation:

The reorder level is that level in which the company setup a new manufacturing unit so that they can fulfill the needs of the customers and attains the customer satisfaction as much as they can.

For computing the reorder level of the stein beer, the computation is shown below:

Reorder level = Daily unit sales ×elivery lead time

                       = 4 × 3 d

                       = 12 cases

The other cost like ordering cost, carrying cost or holding cost, per unit cost is irrelevant while computing the reorder point. Therefore, it is not considered in computation part.

Thus, the reorder level is 12 cases

Hence, at 12 cases the stein beer should reordered by him.