What is the reorder point to achieve desired service level

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Reference no: EM131793655

1. One item a computer store sells is supplied by a vendor who handles only that item. Demand for that item recently changed, and the store manager must determine when to replenish it. The manager wants a probability of at least 96 percent of not having a stockout during lead time. The manager expects demand to average a dozen units a day and have a standard deviation of two units a day. Lead time is variable, averaging four days with a standard deviation of one day. Assume normality and that seasonality is not a factor. What is the reorder point to achieve the desired service level? (round to 2 decimal places)

a. 55.00

b. 70.26

c. 55.04

d. None of the listed

e. 70.14

2. Identify the appropriate inventory model to obtain the optimal lot size for the given problem description:

Rick Jones is chairman of this year’s Walk for Diabetes event. Each year, the organizers of the event typically have commemorative T-shirts available for purchase by the entrants in the walk. Rick needs to order the shirts well in advance of the actual event. Based on past walks, the organizers have determined that the demand for T-shirts is normally distributed with a mean of 100 and a standard deviation of 10. Rick plans to sell the T-shirts for $20 each. He pays his supplier $8 for each shirt and can sell any unsold shirts for rags at $2 each. Determine how many T-shirts Rick should order to maximize his expected profits.

a. EOQ

b. Fixed Order Interval

c. Single Period

d. None of the listed

e. ROP

Reference no: EM131793655

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