Determine the appropriate z-value

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Barbara Flynn is in charge of maintaining hospital supplies at General Hospital. The hospital uses approximately 50 bandages per day. The actual number tends to vary with the number of patients on any given day. Usage can be approximated by a normal distribution that has a mean of 50 and a standard deviation of 4 per day. A supply company delivers bandages with a lead time of 1 week. The hospital policy maintains a stock-out risk of 10%. Also, it is known that the ordering cost is $3 and the yearly holding cost per unit is $1.

(a) Determine the appropriate z-value.

(b) How much safety stock should be held?

(c) Compute the reorder point (ROP).

(d) Calculate economic order quantity.

(e) Briefly explain the scenario above.

Reference no: EM132911453

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