Answered: Petromax Enterprises uses a continuous…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Question

1. Petromax Enterprises uses a continuous review inventory control system for one of its SKUs. The following information is available on the item. The firm operates 52 weeks in a year. Refer to the

standard normal table for z-values.

≻Demand = 78,000 units/year

≻Ordering cost = $30.00/order

≻Holding cost = $3.00/unit/year

≻Average lead time = 1 week

≻Standard deviation of weekly demand = 200 units

a. If Petromax wants to provide a 98% service level, the safety stock is what units (enter your response rounded to the nearest whole number)

2. Sam's Cat Hotel operates 52 weeks per year, 5 days per week, and uses a continuous review inventory system. It purchases kitty litter for $10.50 per bag. The following information is available about these bags. Refer to the standard normal table for z-values.

≻Demand = 100 bags/week

≻Order cost = $58/order

≻Annual holding cost = 29 percent of cost

≻Desired cycle-service level=92 percent

≻Lead time = 1 week(s) (5 working days)

≻Standard deviation of weekly demand = 18 bags

≻Current on-hand inventory is 300 bags, with no open orders or backorders.

a. What should R be?

The reorder point is what bags. (Enter your response rounded to the nearest whole number.)

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