# Question

Monthly demand for an inventory item is a normally distributed random variable with a mean of 20 units and a variance of 4. Demand follows this distribution every month, 12 months a year. When inventory reaches a predetermined level, an order for replenishment is placed. The fixed ordering cost is $ 60 per order. The items cost $ 4 per unit, and the annual inventory holding cost is 25 percent of the average value of the inventory. The replenishment lead time is exactly 4 months.

a. Determine the EOQ.

b. Assume that a 10 percent “all units” discount will be given if the order quantity is greater than or equal to 100 units. What order quantity would you recommend with this offer?

c. Determine the necessary reorder point and safety stock to achieve a 90 percent service level.

a. Determine the EOQ.

b. Assume that a 10 percent “all units” discount will be given if the order quantity is greater than or equal to 100 units. What order quantity would you recommend with this offer?

c. Determine the necessary reorder point and safety stock to achieve a 90 percent service level.

## Answer to relevant Questions

Critique the “Distinctive Characteristics of Service Operations” by arguing that the characteristics of, customer participation, simultaneity, perishablity, intangibility, and heterogeneity, may apply to goods as well. The daily demand for an item is distributed normally, with a mean of 5 and a vari-ance of 2. The cost to place an order is $ 10, and the carrying charge per day is esti-mated at 10 percent of the inventory value. The ...Give an example that demonstrates the trade-off inherent in projects among cost, time, and performance. An electric utility is planning its annual project of shutting down one of its steam boilers for maintenance and repair. An analysis of this project has identified the following principal activities and their expected times ...The following activities are required for completing a project: a. Draw a network diagram of this project showing the activities and their expected duration times. b. What is the critical path and the expected completion ...Post your question

0