Question: 1 . Marshall s paint store uses a ( Q , R ) inventory system to control its stock levels. For a particularly popular white

1. Marshalls paint store uses a (Q, R) inventory system to control its stock levels. For a particularly popular white paint, historical data shows that the distribution of monthly demand is approximately normal, with mean 100 and standard deviation 30. Replenishment lead time for this paint is about 8 weeks. Each can of paint costs the store $5. Although excess demand is back-ordered, the store owner estimates that each unit of unfilled demands cost $12 in bookkeeping and loss-of-goodwill costs. Fixed cost of replenishment is $100 per order, and holding costs are based on a 12 percent annual rate of interest. Assume that there are 4 weeks in a month and 48 weeks in a year. Determine:
a. The optimal lot size and reorder point.
Assuming that the policy in part (a) is used, determine:
b. The safety stock.
c. The average annual holding, setup and penalty costs (separately).
d. The average time between placements of orders.
e. The expected demand per cycle.
f. The expected number of units back-ordered per cycle.
g. The proportion of order cycles in which no stock out occurs.
h. The proportion of demands that are backordered.
i. The probability that there will not be any stock-out during a cycle.

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