APICS Certified in Production and Inventory Management (CPIM) — Question 10

A firm establishes percentage of order cycles rather than out-of-stock units as the measure of customer service. If the firm has an annual demand of 10,400 units and a fixed order quantity of 200 units and is out of stock for six of its order cycles, what is its level of customer service?

Answer options

• A. 11.5%
• B. 33.3%
• C. 66.7%
• D. 88.5%

Correct answer: C

Explanation

To determine the level of customer service, you can calculate the total number of order cycles, which is 10,400 units divided by 200 units per cycle, resulting in 52 cycles. If the company is out of stock for six cycles, it means they had stockouts in 6 out of 52 cycles, leading to a customer service level of (52-6)/52 = 66.7%. The other options do not represent the accurate calculation based on the given data.