A product with an annual demand of 1,000 units has Co = $24.50 and C₁ = $9. The demand exhibits some variability such that the lead-time demand follows a normal probability distribution with μ = 25 and 6 = 5. (a) What is the recommended order quantity? (Round your answer to the nearest integer.) (b) What are the reorder point and safety stock if the firm desires at most a 3% probability of stock-out on any given order cycle? (You may need to use the appropriate appendix table or technology to answer this question. Round your answers to the nearest integer.) reorder point safety stock (c) If a manager sets the reorder point at 30, what is the probability of a stock-out on any given order cycle? (Round your answer to four decimal places.) How many times would you expect a stock-out during the year if this reorder point were used? (Round your answer to the nearest integer.)
A product with an annual demand of 1,000 units has Co = $24.50 and C₁ = $9. The demand exhibits some variability such that the lead-time demand follows a normal probability distribution with μ = 25 and 6 = 5. (a) What is the recommended order quantity? (Round your answer to the nearest integer.) (b) What are the reorder point and safety stock if the firm desires at most a 3% probability of stock-out on any given order cycle? (You may need to use the appropriate appendix table or technology to answer this question. Round your answers to the nearest integer.) reorder point safety stock (c) If a manager sets the reorder point at 30, what is the probability of a stock-out on any given order cycle? (Round your answer to four decimal places.) How many times would you expect a stock-out during the year if this reorder point were used? (Round your answer to the nearest integer.)
Chapter8: Sequences, Series,and Probability
Section8.7: Probability
Problem 11ECP: A manufacturer has determined that a machine averages one faulty unit for every 500 it produces....
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Transcribed Image Text:A product with an annual demand of 1,000 units has C $24.50 and C₁ = $9. The demand exhibits some variability such that the lead-time
demand follows a normal probability distribution with μ = 25 and 6 = 5.
(a) What is the recommended order quantity? (Round your answer to the nearest integer.)
(b) What are the reorder point and safety stock if the firm desires at most a 3% probability of stock-out on any given order cycle? (You may
need to use the appropriate appendix table or technology to answer this question. Round your answers to the nearest integer.)
reorder point
safety stock
(c) If a manager sets the reorder point at 30, what is the probability of a stock-out on any given order cycle? (Round your answer to four
decimal places.)
How many times would you expect a stock-out during the year if this reorder point were used? (Round your answer to the nearest
integer.)
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