Question

A candy manufacturer uses 8,280 pounds of sugar in 30 working days. The lead time for sugar is 10 days. Safety stock is 3 days' usage. What is the stock reorder point? ( Hint : First find the daily usage and compute the exact amount of safety stock.)

Answer 1

Answer :

Stock reorder point is 3588 pounds

Step-by-step explanation :

Stock Reorder Point = ( Lead time × Average daily sales ) + Safety stock

We are given, lead time = 10 days , total sugar consumption is 8280 pounds in 30 days

$\implies Average\thinspace daily\thinspace sales=\frac{Total\thinspace sugar\thinspace consumed}{No.\thinspace of\thinspace days}\\\\\implies Average\thinspace daily\thinspace sales=\frac{8280}{30}=276\thinspace pounds$

Safety stock = 3 days per usage

$\implies Exact\thinspace amount\thinspace of\thinspace safety\thinspace stock=3\cdot Average\thinspace daily\thinspace sales = 3\cdot 276 = 828\thinspace pounds$

Now, Reorder point is given by :

$Stock\thinspace Reorder\thinspace Point = ( Lead\thinspace time \cdot Average\thinspace daily\thinspace sales ) + Safety\thinspace stock\\\implies Stock\thinspace Reorder\thinspace Point = 10\cdot 276\thinspace +\thinspace 828 = 3588\thinspace pounds$

Hence, Stock Reorder Point = 3588 pounds