Calculate the annual turnover as a function of service level

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Reference no: EM131911810

Question: For the data in problem:

a. Calculate the annual turnover as a function of service level.

b. If sales were to increase by 50 percent, what would happen to the turnover at a 95 percent service level?

Problem: The Suregrip Tire Company carries a certain type of tire with the following characteristics:

Average annual sales = 600 tires

Ordering cost = $40 per order

Carrying cost = 25 percent per year

Item cost = $50 per tire

Lead time = 4 days

Standard deviation of daily demand = 1 tire

a. Calculate the EOQ.

b. For a Q system of inventory control, calculate the safety stock required for service levels of 85, 90, 95, 97, and 99 percent.

c. Construct a plot of total inventory investment versus service level.

d. What service level would you establish on the basis of the graph in part c? Discuss.

Reference no: EM131911810

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