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Answer :
The most likely reorder point for the 2-ounce potato chip bags with a desired service level of 99.8% is 80,288 bags.
To calculate the most likely reorder point with a desired service level of 99.8%, we must first determine the safety stock and then add it to the average demand during the lead time.
1. Calculate the safety stock: To do this, we'll need to find the Z-score that corresponds to a 99.8% service level. The Z-score is approximately 2.88 for 99.8%. Next, we take the square root of the variance during the lead time, which is √10,000 = 100.
Multiply the Z-score by the standard deviation: 2.88 x 100 = 288 bags.
2. Determine the average demand during the lead time: This is given as 80,000 bags.
3. Calculate the reorder point: Add the safety stock (288 bags) to the average demand during the lead time (80,000 bags): 80,000 + 288 = 80,288 bags.
The most likely reorder point for the 2-ounce potato chip bags with a desired service level of 99.8% is 80,288 bags.
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