Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Part 3. (Modified from Q2.14) Chairish-Is-The-World (CITW), Inc., manufactures top-end hardwood chairs that are sold through a variety of retail outlets. Each chair takes 1
Part 3. (Modified from Q2.14) Chairish-Is-The-World (CITW), Inc., manufactures top-end hardwood chairs that are sold through a variety of retail outlets. Each chair takes 1 month (lead time) to go through the production line. The most popular model sells for $400 per chair and costs $300 to make. Past data show that average monthly demand is 90 chairs with a standard deviation of 18 chairs and that the normal distribution is a reasonable fit. CITW uses 16% annual interest charge to estimate inventory carrying costs. 13. (5%) What is the holding cost to carry one chair in stock for 1 month? 14. (5%) For the top-end market, CITW decided that Base Stock model is appropriate. What would be the fill rate if we maintain 80 chairs as the reorder level (r)? 15. (5%) Assume that orders can be backlogged and the cost of lost customer goodwill from carrying a single chair on backorder is $26 a month. What would be the optimal reorder level (r) in terms of cost? (Still use Base Stock model.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started