What is the probability of running out of stock

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Reference no: EM13229182

1 Andrew McGregor forecast weekly demand for MP 411 pumps as follows:

Week

1

2

3

4

5

6

7

8

9

10

11

Demand

1

6

10

21

18

7

4

3

2

4

15

 

Week

12

13

14

15

16

17

18

19

20

21

22

Demand

27

38

51

40

22

12

8

6

7

2

3

Each pump costs £80, it costs £800 to place an order and get delivery, and holding cost is 20 per cent of value a year. Design a reasonable ordering policy for the pump. How much does this cost a year?

2 At the beginning of December Southern Conifers Limited employ a contractor to cut enough trees to meet the expected demand for Christmas trees. They sell these to a local wholesaler in batches of 100. Over the past few years the demand has been as follows.

Batches

1

2

3

4

5

6

7

8

9

Probability

0.1

0.1

0.2

0.2

0.1

0.1

0.1

0.1

0

If it costs £16 to cut and trim a tree that sells for £25, how many trees should the company cut down?

3 The demand for an item is Normally distributed with mean of 40 units and standard deviation of 4 units a month. The lead time is one month, shortage cost is £200, reorder cost is £40, and holding cost is £4. What are optimal values for the order quantity and reorder level? 5.6 Lee Brothers advertise a 90 per cent cycle-service level for all stock items. Stock is replenished from a single supplier who guarantees a lead time of 4 weeks. What reorder level should they use for an item that has a Normally distributed demand with mean 2,000 units a week and standard deviation of 200 units? What is the reorder level for a 95 per cent cycle-service level? What is the effect of moving to a periodic review method with interval of 2 weeks?

4 Demand for an item is 100 units a week with a standard deviation of 10 units. Lead time is one week and the reorder level used is 115 units. What is the probability of running out of stock?

Reference no: EM13229182

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