Compare the inventory investments for systems

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Reference no: EM131911816

Question: For the data given in problem:

a. Design a P system for this phone with a 92 percent service level.

b. Compare the inventory investments required for the P and Q systems (from problem 8) for various values of service level.

c. Why does the P system require a higher inventory investment?

Problem: An electronics retailer carries a particular cellular telephone with the following characteristics: Average monthly sales = 120 units

Ordering cost = $25 per order

Carrying cost = 35 percent per year

Item cost = $300 per unit

Lead time = 4 days

Standard deviation of daily demand = .2 unit

Working days per year = 250

a. Determine the EOQ.

b. Calculate the reorder point for a 92 percent service level, assuming normally distributed demand.

c. Design a Q system for this item.

d. What happens to the reorder point when the lead time changes? What happens to the reorder point when the standard deviation of demand changes?

Reference no: EM131911816

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