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What level of inventory should the manager places an order

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The weekly use of paper tissue at a restaurant is normally distributed with an average of 80 bags and a variance of 9 bags per week. The lead time for ordering new paper tissues is 2 weeks. Assume the restaurant opens 50 weeks a year.

2. If the ordering cost is $40 and inventory carrying cost is $2 per bag per year, how much paper tissues should the restaurant manager order each time?

3. In order to limit the stockout risk to be no more than 1%, at what level of inventory should the manager places an order?

4. Suppose the lead time now becomes random and is normally distributed with a mean of 2 weeks and a standard deviation of 0:3 weeks. The manager still chooses the safety stock obtained from part 3. What is the stockout risk now?

Reference no: EM132736322

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