Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

Home Depot procures a popular bathtub from its supplier at a cost of $ 6 0 4 per unit. The holding cost at Home Depot's

Home Depot procures a popular bathtub from its supplier at a cost of $604 per unit. The holding cost at Home Depot's distribution center (DC) is 37% of the purchase cost per unit per year. Weekly demand for the bathtub at the DC is normally distributed with a mean of 1,673 units per week and a standard deviation of 355 units per week. Home Depot would like to maintain a 93% cycle service level for this product.
Suppose that Home Depot reviews its inventory continuously and that lead times for orders placed with the manufacturer are normally distributed with a mean of 4 week(s) and a standard deviation of 4 week(s).
Compute the annual holding cost of the safety stock (in dollars) required to meet the desired service level.
Rounding instructions:
Carry calculations to at least 3 decimal places.
Round your answer to the nearest tenth of a dollar (one decimal place).

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield

13th Edition

978-0470423684

Students also viewed these General Management questions