Question 13.

A buyer for a department store orders sweaters about 6 months before the winter season. The store plans to hold a March clearance sale to sell any surplus goods by February 29. Each piece costs $100 per pair and sells for $120 per pair. At the sale price of $60 per pair, it is expected that any remaining stock can be sold during the March sale. Assume that a uniform probability distribution ranging from 250 to 450 items describes the demand. The expected demand is 300. In the context of the single period inventory system, the optimal order size Qmust satisfy the condition _____.

a. P(demand Q*) = 1/5

b. P(demand Q*) = 1/4

c. P(demand Q*) = 1/3

d. P(demand Q*) = 1/2

Question 17.

Brenda is the owner of a spa store that operates 50 weeks per year. Spair Shampoo is a high margin stock keeping unit (SKU), but the product goes out of stock frequently. She decides to use a fixed-quantity system (FQS) and orders boxes of Spair Shampoo containing 10 bottles per box from a vendor 160 miles away. She collects the following data with respect to the sales of Spair Shampoo.

Demand 10 boxes per week

Order Cost $40 per order

Item Cost $80 per box per year

Inventory-Holding Cost 15 percent per year

Lead Time 3 weeks

Standard Deviation in Weekly Demand 6

Service Level 96 percent

Using the given data, it can be concluded that the economic order quantity (EOQ) of the Spair Shampoo boxes is:

a. more than 35 but less than or equal to 45 boxes

b .more than 25 but less than or equal to 35 boxes.

c. less than 25 boxes.

d. more than 55 boxes.