Calculate the best order quantity and reorder point

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Question: Consider the data given in problem 16b at the end of chapter 2 of Factory Physics.

Assume that demand variability follows a Poisson distribution and that the desired service level is 98% probability of not stocking out.

Calculate the best order quantity and reorder point for Module Type B.

The data given in 16b is as follows:

Model A: cost= $150 each, used at a rate of 7 per month, leed time= 1 month

Model B: cost=$15, used at a rate of 30 per month, leed time = 0.5 month

assume 1 month= 30 days

estimate to replenish an order is $5 regardless of model.

holding cost intrest rate is 3% per month

Reference no: EM131931768

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