Question: Chairish - Is - The - World ( CITW ) , Inc., manufactures top - end hardwood chairs that are sold through a variety of

Chairish-Is-The-World (CITW), Inc., manufactures top-end hardwood chairs that are sold through a variety of retail outlets. Each chair takes 1 month (lead time) to go through the production line. The most popular model sells for $400 per chair and costs $250 to make. Past data show that average monthly demand is 90 chairs with a standard deviation of 12 chairs and that the normal distribution is a reasonable fit. CITW uses 18% annual interest charge to estimate inventory carrying cossts.
15.(5%) Assume that orders can be backlogged and the cost of lost customer goodwill from carrying a single chair on backorder is $24 a month. What would be the optimal reorder level (r) in terms of cost?(Still use Base Stock model.)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!