Compute the risk of stockout

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Reference no: EM132149420

A small copy center uses five 500-sheet boxes of copy paper a week. Experience suggests that usage can be well approximated by a normal distribution with a mean of five boxes per week and a standard deviation of one-half box per week. Four weeks are required to fill an order for letterhead stationery. Ordering cost is $2, and annual holding cost is 40 cents per box.

A) Determine the economic order quantity, assuming a 52-week year. (Round your answer to the nearest whole number.)

B) If the copy center reorders when the supply on hand is 22 boxes, compute the risk of a stockout. (Round "z" value to 2 decimal places and final answer to 4 decimal places.)

C) If a fixed interval of seven weeks is used for ordering instead of an ROP, how many boxes should be ordered if there are currently 21 boxes on hand, and an acceptable stockout risk for the order cycle is .0351? (Round "z" value to 2 decimal places and final answer to the nearest whole number.)

Reference no: EM132149420

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