The following data relate to the probability distributions of the lead time and demand of product...

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The following data relate to the probability distributions of the lead time and demand of product "Que", Lead time (days) 15 Demand (units) 12,500 17,500 20 25. Additional information: 2. 3. 4. 5. (iv) Required: (i) Probability 0.2 0.5 0.3 Probability 0.4 0.6 The ordering cost is Sh.1,000 per order. The holding cost is estimated at 10 per cent of the cost of inventory plus Sh.0.025 per unit for storage.. Each unit of stock costs Sh.2. The re-order level is 375,000 units. Assume a 360-day year. The level of buffer stock implicit at a re-order level of 375,000 units. (5 marks) The probability of having a stock-out. (2 marks) The expected annual stock-out in units. (4 marks) The stock-out cost per unit at which it would be worthwhile to raise the re-order level to 437,500 units. (3 marks) (Total: 20 marks) The following data relate to the probability distributions of the lead time and demand of product "Que", Lead time (days) 15 Demand (units) 12,500 17,500 20 25. Additional information: 2. 3. 4. 5. (iv) Required: (i) Probability 0.2 0.5 0.3 Probability 0.4 0.6 The ordering cost is Sh.1,000 per order. The holding cost is estimated at 10 per cent of the cost of inventory plus Sh.0.025 per unit for storage.. Each unit of stock costs Sh.2. The re-order level is 375,000 units. Assume a 360-day year. The level of buffer stock implicit at a re-order level of 375,000 units. (5 marks) The probability of having a stock-out. (2 marks) The expected annual stock-out in units. (4 marks) The stock-out cost per unit at which it would be worthwhile to raise the re-order level to 437,500 units. (3 marks) (Total: 20 marks)

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The detailed answer for the above question is provided below Answer i The level of buffer stock i... View the full answer