Question 10.6 Storage Limited operates a 50-week working year. It produces a product called GENERAL' for which demand any week in the year is described by the probability distribution below: Demand 0 1 2 3 4 5 6 7 8 9 Probability 0.07 0.10 0.11 0.13 0.15 0.17 0.13 0.08 0.04 0.02 Demand can only be satisfied (if at all) from stocks. The stockholding costs are N4 per item per year. Fixed costs per re-order are N16 and the variable, re-order costs are N30 per unit Lead time is one week. The costs of being out of stock are N12 per unit short. You are required to calculate: [i] The average weekly demand; (2 marks) [ii The average annual demand; (2 marks) [] The Economic Order Quantity; (2 marks) [iv] The number of ordering cycles in the year; and (2 marks) [v] State briefly the main reason for holding inventory, and explain why good inventory management is a very important aspect of overall company management. (2 marks) Question 10.6 Storage Limited operates a 50-week working year. It produces a product called GENERAL' for which demand any week in the year is described by the probability distribution below: Demand 0 1 2 3 4 5 6 7 8 9 Probability 0.07 0.10 0.11 0.13 0.15 0.17 0.13 0.08 0.04 0.02 Demand can only be satisfied (if at all) from stocks. The stockholding costs are N4 per item per year. Fixed costs per re-order are N16 and the variable, re-order costs are N30 per unit Lead time is one week. The costs of being out of stock are N12 per unit short. You are required to calculate: [i] The average weekly demand; (2 marks) [ii The average annual demand; (2 marks) [] The Economic Order Quantity; (2 marks) [iv] The number of ordering cycles in the year; and (2 marks) [v] State briefly the main reason for holding inventory, and explain why good inventory management is a very important aspect of overall company management. (2 marks)