Information for Q18 to Q20 (Risk Pooling): Home Depot sells the LawnBoy T650 lawn mowers at...

Transcribed Image Text:

Information for Q18 to Q20 (Risk Pooling): Home Depot sells the LawnBoy T650 lawn mowers at 81 stores in the Midwest. Weekly demand for the T650 at each of the stores is normally distributed, with a mean of 40 and a standard deviation of 25. Assume that the demands at the 81 stores are independent of each other. The manufacturer (John Deere) takes 4 weeks to supply an order. Home Depot has a stated policy of 96% cycle service level for mowers. The cost of each mower is $500, and Home Depot uses a 40% annual holding cost rate. The chain is considering centralizing the inventory of the T650 to a distribution center that will serve all 81 stores. 18. The safety stock needed at each store is: A) 44 mowers B) 50 mowers C) 88 mowers D) 160 mowers 19. The safety stock needed at the DC is: A) 3240 mowers B) 788 mowers C) 450 mowers D) 394 mowers 20. The annual savings in inventory holding cost as a result of the centralization is: A) $157,600 B) $1,268,000 C) $1,425,600 D) $3,170,000 Information for Q18 to Q20 (Risk Pooling): Home Depot sells the LawnBoy T650 lawn mowers at 81 stores in the Midwest. Weekly demand for the T650 at each of the stores is normally distributed, with a mean of 40 and a standard deviation of 25. Assume that the demands at the 81 stores are independent of each other. The manufacturer (John Deere) takes 4 weeks to supply an order. Home Depot has a stated policy of 96% cycle service level for mowers. The cost of each mower is $500, and Home Depot uses a 40% annual holding cost rate. The chain is considering centralizing the inventory of the T650 to a distribution center that will serve all 81 stores. 18. The safety stock needed at each store is: A) 44 mowers B) 50 mowers C) 88 mowers D) 160 mowers 19. The safety stock needed at the DC is: A) 3240 mowers B) 788 mowers C) 450 mowers D) 394 mowers 20. The annual savings in inventory holding cost as a result of the centralization is: A) $157,600 B) $1,268,000 C) $1,425,600 D) $3,170,000

Answer rating: 100% (QA)

18 B 50 m owers The safety stock needed at each store is calculated using the following formula Safe... View the full answer