Question: A printing company estimates that on average, it will require 1000 reams of a certain type of paper in a year. The cost of carrying
A printing company estimates that on average, it will require 1000 reams of a certain type of paper in a year. The cost of carrying one unit in inventory for 1 year is 51 cents. The company buys the paper from a wholesaler in the same town, sending its own truck to pick up the orders at a fixed cost of $25 per trip, which is treated as the order cost. The order lead time is 4 weeks, and the standard deviation of the weekly demand is 20 reams.
Using the optimum ordering quantity under the continuous-review model and a service level of 90%, what is the average number of reams of paper held by the company?
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