Question
SportsCheck sells on average 10 soccer balls per day. The balls cost $60 and sell for $90. They are produced and shipped from abroad at
SportsCheck sells on average 10 soccer balls per day. The balls cost $60 and sell for $90. They are produced and shipped from abroad at a cost of $600 per shipment regardless of the size of the shipment. The inventory carrying cost is estimated to be 20% of the item cost per year. Currently the company orders soccer balls once a month. (Assume 30 days per month.)
Upon further analysis you discover that demand is not constant. The average daily demand is 10 and the standard deviation is 1.5.The lead time is 10 days. If the company reorders with 100 balls left in stock (i.e. the average demand during lead time), the probability of a stockout in a cycle will be 0.5. What is the reorder point that bring the stockout probability down to 0.01?
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