Question
Ray wishes to determine the optimal order quantity for its best-selling bike in his bike store. Ray pays the supplier a wholesale price of $125
Ray wishes to determine the optimal order quantity for its best-selling bike in his bike store. Ray pays the supplier a wholesale price of $125 each for this bike. Ray has estimated the average daily demand for this bike is 23 units. The store opens 300 days a year. The cost to carry one bike in the store for a whole year is 5% of the unit bike cost. Ray has estimated that, on average, the order processing cost, i.e., ordering cost, with the bike supplier each time is $120, and it roughly takes 13 working days to receive the order from the supplier. Ray wishes to avoid the stock-out situation with a probability of 95%, and this requires Ray to carry a safety stock of 35 bikes in the store. What is the re-order point inventory level that Ray needs to re-order and stock up the bike? Input should be an exact number.
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