Question
Question 1) Daily demand for the ice cream at Salt and Straw parlor is normally distributed with a mean of 200 quarts and a standard
Question 1) Daily demand for the ice cream at Salt and Straw parlor is normally distributed with a mean of 200 quarts and a standard deviation of 100. The owner has the ice cream supplied by a wholesaler who charges $2.80 per quart. The wholesaler charges an $80 delivery charge independent of order size. The opportunity cost of capital to Salt and Straw estimated to be 25% per year. Assume 365 days in a year.
- Whatistheoptimalordersizeandassociatedtotalinventorycostomittingmaterialcosts(holdingcostplusorderingcost)?
- Supposethatdemandincreasesbyafactorof4(to800quartsperday),howdotheanswersprovidedinpartachange?Canyougenerali?
- Assumethatittakes4daysforanordertobesupplied.Theownerswouldliketoensurea90%servicelevel.Howmuchsafetystockoficecreamshouldthestorehave?Whatisthecostofholdingthismuchsafetystock?
- Providetwowaystoreducethecostofholdingsafetystockatagiven(fixed)servicelevel.
Question 2)
Suppose that you have been assigned to be the production manager of a new line of Mens blazers with a target delivery date within 3 weeks. Your market analysts claim that the market can easily bear the price of $120 per blazer. Production costs stand at $40, since it is sourced locally. They expect demand to be about 500 units with a standard deviation of 100. The demand follows a normal distribution. Any unsold blazers will be salvaged at discount stores for $20 per piece.
- Whatistheoptimalorderquantityforthisfashionitem?
- Intheeventofastockout,customerscanoccasionallybecomehostileandlookforasimilaritemfromacompetitor.Managementhasgiventhephenomenonaname,goodwillcostandassigneditavalueof$20,foreachtimeastockouthappens.Shouldthegoodwillcostbeincludedinthecostofover-stockingorunder-stocking?
- Calculatethenewoptimalorderquantity.
- Isthenewsvendorareasonablemodelforthefashionindustry?Whatassumptionswouldyoutest,andwhatdataelementsdoyouneedtouseitappropriately?Thinkthroughtheelementsofthemodel.
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