Scenario 9.7 Cranium, Inc., Purchases Term Papers from an Overseas Supplier Under

Multiple Choice

Scenario 9.7
Cranium, Inc., purchases term papers from an overseas supplier under a continuous review system. The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day. It costs $60 to process each order and there is a five-day lead-time. The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level. Cranium operates 200 days per year.
-Use the information in Scenario 9.7. What service level does a reorder point of 1,524 imply?

A) less than or equal to 50%
B) greater than 50% but less than or equal to 55%
C) greater than 55% but less than or equal to 60%
D) greater than 60%