OPERATIONS MANAGEMENT
2nd Edition
ISBN: 9781260238877
Author: CACHON
Publisher: RENT MCG
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Chapter 14, Problem 5PA
You are the owner of Hotspices.com, an online retailer of hip, exotic, and hard-to-find spices. Consider your inventory of saffron, a spice (generally) worth more by weight than gold. You order saffron from an overseas supplier with a shipping lead time of four weeks and you order weekly. Average weekly demand is normally distributed with a mean of 40 ounces and a standard deviation of 30 ounces.
- a. Suppose it uses an order-up-to level of 301 ounces. What is its expected on-hand inventory? [LO14-2]
- b. Suppose it uses an order-up-to level of 250 ounces. What is its expected on-order inventory? [LO14-2]
- c. Suppose it uses an order-up-to level of 368 ounces. What is its in-stock probability? [LO14-2]
- d. Suppose it wants a .96 in-stock probability. What should its order-up-to level be? [LO14-3]
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You are the owner of Hotspices.com, an online retailer of hip, exotic, and hard-to-findspices. Consider your inventory of saffron, a spice (generally) worth more by weightthan gold. You order saffron from an overseas supplier with a shipping lead time of fourweeks and you order weekly. Average weekly demand is normally distributed with amean of 40 ounces and a standard deviation of 30 ounces.a. Suppose it uses an order-up-to level of 301 ounces. What is its expected on-hand inventory? b. Suppose it uses an order-up-to level of 250 ounces. What is its expected on-order inventory? c. Suppose it uses an order-up-to level of 368 ounces. What is its in-stock probability? d. Suppose it wants a .96 in-stock probability. What should its order-up-to level be?
The home appliance department of a large department store is using a lot size–reorder point system to control the replenishment of a particular model of FM table radio. The store sells an average of 10 radios each week. Weekly demand follows a normal distribution with variance 26.The store pays $20 for each radio, which it sells for $75. Fixed costs of replenishment amount to $28.The accounting department recommends a 20 percent interest rate for the cost of capital. Storage costs amount to 3 percent and breakage to 2 percent of the value of each item.If a customer demands the radio when it is out of stock, the customer will generally go elsewhere. Loss-of-goodwill costs are estimated to be about $25 per radio. Replenishment lead time is three months.a. If lot sizes are based on the EOQ formula, what reorder level should be used for the radios?b. Find the optimal values of (Q, R).c. Compare the average annual costs of holding, ordering, and stock-out for the policies that you found in…
Chapter 14 Solutions
OPERATIONS MANAGEMENT
Ch. 14 - Demand in each period follows the same normal...Ch. 14 - Prob. 2CQCh. 14 - For products with slow-moving demandfor example,...Ch. 14 - Prob. 4CQCh. 14 - Prob. 5CQCh. 14 - Prob. 6CQCh. 14 - Prob. 7CQCh. 14 - Prob. 8CQCh. 14 - If the target in-stock probability increases, then...Ch. 14 - Prob. 10CQ
Ch. 14 - Prob. 11CQCh. 14 - Prob. 12CQCh. 14 - Prob. 13CQCh. 14 - Prob. 14CQCh. 14 - Prob. 15CQCh. 14 - Prob. 16CQCh. 14 - Prob. 17CQCh. 14 - Prob. 18CQCh. 14 - Prob. 19CQCh. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Prob. 3PACh. 14 - Prob. 4PACh. 14 - You are the owner of Hotspices.com, an online...Ch. 14 - Prob. 6PACh. 14 - Prob. 7PACh. 14 - Prob. 8PACh. 14 - Prob. 9PACh. 14 - Prob. 10PACh. 14 - Prob. 11PACh. 14 - Prob. 1CCh. 14 - Prob. 2CCh. 14 - Prob. 3CCh. 14 - CASE WARKWORTH FURNITURE1 Warkworth Furniture...Ch. 14 - CASE WARKWORTH FURNITURE1 Warkworth Furniture...
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