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First Printing has contracts with legal firms in San Francisco to copy their court documents. Daily demand is almost constant at 12,500 pages of documents. The lead time for paper delivery is normally distributed with a mean of 4 days and a standard deviation of 1 day. A 97% service level is expected. Compute First’s ROP.

Answer :

Answer:

73,500 pages

Explanation:

The computation of the reorder point is shown below:

Reorder point = (Average daily demand × mean lead time for paper delivery )+ (Z × Average daily demand × standard deviation)

where,

Z = service level at 97% is 1.88

So, the reorder point is

= (12,500 pages × 4 days) + (1.88 × 12,500 pages × 1 days)

= 50,000 + 23,500

= 73,500 pages

We simply applied the above formula

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