Question
Copy of A regional distributor purchases discontinued appliances from various suppliers and then sells them on demand to retailers in the region. The distributor operates
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Copy of
A regional distributor purchases discontinued appliances from various suppliers and then sells them on demand to retailers in the region. The distributor operates 5 days per week, 52 weeks per year. Only when it is open for business can orders be received. Management wants to re-evaluate its current inventory policy, which calls for order quantities of 440 counter-top mixers. The following data re estimated for the mixer:
- Average daily demand () = 100 mixer
- Standard deviation of daily demand () = 30 mixers
- Lead time (L) = 3 days
- Holding cost (H) = $9.40 / unit / year
- Ordering cost (S) = $35 / order
- Cycle-service level = 92%
- The distributor uses a periodic review (Q) system
Calculate the P (in workdays, rounded to the nearest day) that gives approximately the same number of orders per year as the EOQ.
What is the Target Inventory Level (T)? (round to the nearest whole unit)
What is the total annual inventory cost of the P system? (Answer to two decimals)
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