Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger

Exercise 3

Safety Stock; Reorder Point
Party-Hearty Company makes a variety of holiday party packs. One party pack is for a bachelorette party. It includes a tiara, a pink feathered boa, and a t-shirt emblazoned with ''I'm the Bride.'' Pink feathered boas are purchased from an outside supplier. Each year, 6,500 boas are used, at the rate of 16 boas per day. However, some days as many as 50 boas are used. It takes 6 days from the time that Party-Hearty places an order of boas to the 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.
4. CONCEPTUAL CONNECTION As a manager for Party-Hearty, how could seasonality affect the usage of boas? How could knowledge of the effect of seasonality affect the amount of safety stock carried?