Cost and Management AccountingQuestion 5442 of 251
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4. Assuming that the company is willing to take a 5% risk of being out of stock what would be the safety stock and Re-order point?

Options

ASafety stock 1100 batteries and Re-order point 2800 batteries
BSafety stock 1350 batteries and Re-order point 2550 batteries
CSafety stock 1280 batteries and Re-order point 2900 batteries
DSafety stock 1550 batteries and Re-order point 3280 batteries
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Correct Answer

Option ASafety stock 1100 batteries and Re-order point 2800 batteries

All Options:

  • ASafety stock 1100 batteries and Re-order point 2800 batteries
  • BSafety stock 1350 batteries and Re-order point 2550 batteries
  • CSafety stock 1280 batteries and Re-order point 2900 batteries
  • DSafety stock 1550 batteries and Re-order point 3280 batteries

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Detailed Solution & Explanation

Based on the case study parameters for Skylark Electronics, the safety stock and the Re-order point are determined. If the company is willing to take a 5% risk of being out of stock:
1. **Safety Stock:** 1,100 batteries
2. **Re-order Point:** 2,800 batteries (as specified in Option A).
Hence, **Option A** is the correct answer.

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