ICON Candies is a three store retailer of freshly boxed chocolate candies

serving the greater NYC metropolitan area. ICON orders it chocolate

candies directly from a candy maker in Belgium and has a central

refrigerated warehouse where the firm stores individual candies shipped

directly to Newark (by air) from the supplier. The lead-time from order to

receipt is 4 weeks. ICON's order costs are $300 per order and the holding

cost are 20% of the cost of an individual candy. Candies are ordered as

individual units (pieces), but the order quantity needs to be a multiple of

12 (each box of candy created by ICON has 12 pieces of candy) and the

average cost per candy is $.85. A feature of an ICON box of candy is that

you never know exactly what's in it. Each box is assembled by randomly

selecting 12 candies from a possible assortment of 20 different types of

cream-filled chocolate. The grouping only occurs when the boxes are

created and "no two boxes are exactly alike" is the product's tagline.

Each box of candy is sold for $24.99 and annual demand follows a normal

distribution with a mean of 6000 boxes and a standard deviation of 320.

To maintain customer goodwill, ICON has set a high service level

objective of 95% in stock. Consider a year to have 52 weeks or 365 days.

What should be ICON Candy's ROP (Reorder Point). Round up the ROP

to the nearest multiple of 12. Note your answer may

differ

slightly

depending upon rounding. Pick the answer closest to your

answer.

3468

7728

4020

7296

6960

7296 is the answer but how to calculate