Winner Company stocks interior pre-hung doors purchased from a vendor from China. A typical door is purchased
Question:
Winner Company stocks interior pre-hung doors purchased from a vendor from China. A
typical door is purchased for $44.50 and sells for $58. It is estimated that the cost of order
processing and delivery is $100 per order. The company uses an inventory carrying charge
based on a 26% annual interest rate.
Assume that if a door is demanded when
stockout
, then the demand is backordered, and
the cost assessed for each backordered demand is $15. Suppose the supplier lead time for
the doors is 6 weeks and that weekly demand (assuming 52 weeks per year) is normally
distributed with mean 50 and standard deviation 15.
a.
What is the optimal (Q, R) policy?
b.
What is the optimal service level?
Recall Co and Cu in newsvendor model, optimal service level = critical ratio = Cu/(
Co+Cu
)
a.
How
much safety stock, on average, of doors would the company hold?
b.
How much cycle stock, on average, of doors would the company hold?
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson