Cornerstones of Managerial Accounting 4th Edition by Maryanne Mowen, Don Hansen, Dan Heitger

Exercise 46

Safety Stock; Reorder Point O
Relsen Company makes a variety of household appliances, including automatic can openers. Small motors used in making can openers are purchased from an outside supplier. Each year, 20,000 small motors are used, at the rate of 75 small motors per day. However, some days as many as 85 small motors are used. It takes Relsen 4 days from the time of order to the time of arrival of the order.
Required:
1. Calculate the reorder point without safety stock.
2. Calculate the amount of safety stock.
3. Calculate the reorder point with safety stock.