Meyer Stores carries a specialty line of flavored syrups. One of the most popular of these is raspberry syrup which sells, on average, 50 bottles per week. Meyer’s cost is $8 per bottle. Meyer has determined its order cost to be $60 and inventory carrying cost is 20 percent. Meyer is open for business 52 weeks per year.
If the lead time is two weeks for raspberry syrup and Meyers would like a 99% service level, what should the reorder point be? The MAD for this product is 12 units per month (one month = 4 weeks.