What is the optimal order quantity

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Reference no: EM133612627

Assignment:

Winner Company stocks interior pre-hung doors purchased from a vendor from China. A typical door is purchased for $44.50 and sells for $58. It is estimated that the cost of order processing and delivery is $100 per order. The company uses an inventory carrying charge based on a 26% annual interest rate.

Assume that if a door is demanded when stockout, then the demand is backordered, and the cost assessed for each backordered demand is $15. Suppose the supplier lead time for the doors is 6 weeks and that weekly demand (assuming 52 weeks per year) is normally distributed with mean 50 and standard deviation 15.

Recall Co and Cu in newsvendor model, optimal service level = critical ratio = Cu/(Co+Cu)

1. What is the optimal order quantity?

2. What is the optimal reorder point?

3. What is the optimal service level? Please answer with a number in [0,1].

4. How much safety stock, on average, of doors would the company hold?

5. How much cycle stock, on average, of doors would the company hold?

Reference no: EM133612627

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