Quadrex Company produces a component used in its production of cell phones. The time to set up and produce a batch of the components is four days. The average daily usage is 2,000 components, and the maximum daily usage is 2,350 components.
Required
1. Compute the reorder point assuming that safety stock is carried by Quadrex. How much safety stock does the company carry?
2. Now suppose that the average daily usage of 2,000 components is also the maximum daily usage. However, the setup time is four days on average, but could take a maximum of five days. Compute the reorder point assuming that safety stock is carried by Quadrex. How much safety stock does the company carry?