E-buy, a popular consumer electronics store in Lawrence, follows a... E-buy, a popular consumer electronics store in
Question:
E-buy, a popular consumer electronics store in Lawrence, follows a...
E-buy, a popular consumer electronics store in Lawrence, follows a base stock policy for its best selling vacuum cleaner. The weekly demand for this brand of vacuum cleaners is normally distributed with a mean of 10, and a standard deviation of 4. The manufacturer of this vacuum cleaner takes 4 weeks to replenish an order from E-buy. E-buy estimates that the holding cost for the vacuum cleaner is $15/unit/week, while the backorder cost is $10/unit/week.
1) What should be E-buy's target base-stock level to balance their backorder and inventory holding cost? If your answer is not an integer, provide at least three decimal places, e.g., 7.500.
2)Given the optimal base-stock level you calculated in the previous question, what is E-buy's stockout probability for this brand of vacuum cleaners? If your answer is not an integer, provide at least three decimal places, e.g., 7.500.
3)E-buy has realized that they have underestimated the backorder cost. What base-stock level should they choose to achieve a in-stock probability of 0.75? If your answer is not an integer, provide at least three decimal places, e.g., 7.500.
(There is an explanation posted on here but it genuinely confused me. Can you help me solve this?