Probability distribution for demand

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Reference no: EM13901748

Dumoor Appliance Center sells and services several brands of major appliances. Past sales for a particular model of refrigerator have resulted in the following probability distribution for demand:

DEMAND PER WEEK 0 1 2 3 4

Probability 0.20 0.40 0.20 0.15 0.05

The lead time, in weeks, is described by the following distribution:

LEAD TIME (WEEKS) 1, 2, 3

Probability 0.15, 0.35, 0.50

Based on cost considerations as well as storage space, the company has decided to order 10 of these each time an order is placed. The holding cost is $1 per week for each unit that is left in inventory at the end of the week. The stockout cost has been set at $40 per stockout. The company has decided to place an order whenever there are only two refrigerators left at the end of the week. Simulate 10 weeks of operation for Dumoor Appliance assuming there are currently 5 units in inventory. Determine what the weekly stockout cost and weekly holding cost would be for the problem.

Reference no: EM13901748

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