Question

Demand for walnut fudge ice cream at the Sweet Cream Dairy can be approximated by a normal distribution with a mean of 24 gallons per week and a standard deviation of 3.3 gallons per week. The new manager desires a service level of 90 percent. Lead time is two days, and the dairy is open seven days a week. (Hint: Work in terms of weeks.) 

Use Table B and Table B1.

 If an ROP model is used, what ROP would be consistent with the desired service level? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) 

ROP = _______ gallons

Answer 1

Average weekly demand for ice cream (d) = 24 gallons

Lead time (L) = 2 days or 2/7 weeks

The standard deviation of weekly demand (_d) = 3.3 gallons

Service level expectancy = 90%

Z-value corresponding to 90% service level = 1.28

Re-order point (ROP) is given by the formula,

gallons

Hence the re-order point is 9.11 gallons.