He manager of the student center cafeteria, has added pizza to the menu. The pizza is ordered frozen from a local pizza establishment and baked at the cafeteria. She anticipates a weekly demand of 10 pizzas. The cafeteria is open 45 weeks per year. The ordering cost if $15 and the holding cost is $0.40 per pizza per year. The pizza vendor has a one week lead-time and the manager wants to maintain 1 pizza for safety stock. What is the optimal reorder point

The correct answer is 11 pizza.

Explanation:

According to the scenario, computation of the given data are as follows:

Weekly demand = 10 pizzas

Safety stock = 1 pizza

Let cafeteria works 5 days a week, then daily demands = 10 ÷ 5 = 2 pizza per day

Lead time = one week = 5 days working.

So, we can calculate the optimal reorder point by using following formula:

Optimal reorder point =  (Daily demand × Lead time) + Safety stock

By putting the value, we get

Optimal reorder point = ( 2 × 5) + 1

= 10 + 1

= 11 pizzas.

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