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Consider a product with an average annual demand of 100,000 units. The sales price to customers is $100 per unit, the cost of goods sold
Consider a product with an average annual demand of 100,000 units. The sales price to customers is $100 per unit, the cost of goods sold is 50% of the sales price, and the annual holding cost percentage is 30%. It costs $150 in lost production every time the process is set up to produce this product. There are 250 workdays per year. The lead time from the supplier is 8 days. The company desires a cycle service level of 67% and uses a continuous review system. Demand is approximately normally distributed with a standard deviation of demand per day of 60 units. 1. How much safety stock should be held? (Round answer to the whole number, but keep standard deviation with 4 decimals during intermediate calculations) 2. At what inventory level should the company re-order? (Round answer to the whole number). 3. What is the inventory position if the on-hand inventory is zero, the scheduled receipts are 500 and there are outstanding backorders for 2000 units? 4. How many units should be ordered? (Answer should be a whole number)
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