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9 . Floyd Distributors, Inc., provides a variety of auto parts to small local garages. Floyd purchases parts from manufacturers according to the EOQ model
Floyd Distributors, Inc., provides a variety of auto parts to small local garages. Floyd purchases parts from manufacturers according to the EOQ model and then ships the parts from a regional warehouse direct to its customers. For a particular type of muffler, Floyd's EOQ analysis recommends orders with Q to satisfy an annual demand of mufflers. Floyd's has working days per year, and the lead time averages days. a What is the reorder point if Floyd assumes a constant demand rate? b Suppose that an analysis of Floyd's muffler demand shows that the leadtime demand follows a normal probability distribution with mu and sigma If Floyd's management can tolerate one stockout per year, what is the revised reorder point? c What is the safety stock for part b If Ch$ unityear what is the extra cost due to the uncertainty of demand?
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