Solving inventory problem

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Reference no: EM1377762

Julia Walters have and operates one of the biggest Mercedes-Benz auto dealerships in Washington, DC. In the past thirty-six months her sales of this luxury car have ranged from a low of six new cars to a high of twelve new cars, as reflected in the following table:

Sales of new cars per month Frequency
6 3
7 4
8 6
9 12
10 9
11 1
12 1
Total 36

Walters believes that sales will continue during the next 24 months at about the same historical rates and that delivery times will also continue to follow this pace (stated in probability form):

DELIVERY TIME (MONTHS) PROBABILITY
1 0.44
2 0.33
3 0.16
4 0.07

Walters's current policy is to order 14 cars at a time (two full truckloads, with 7 autos on each truck) and to place a new order whenever the stock on hand reaches 12 autos. What are the results of this policy when simulated over the next two years?

Reference no: EM1377762

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