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The annual demand for a specific product is 3,500 units and has the following ordering and holding costs: Co = $20.50 per order and
The annual demand for a specific product is 3,500 units and has the following ordering and holding costs: Co = $20.50 per order and Ch = $8.00 per unit. Demand exhibits some variability such that the lead-time demand follows a normal probability distribution with = 45 units and a = 12 units. a) What is the recommended order quantity for this product? Express your answer as a whole number using standard rounding rules. b) If the manager sets the reorder point at 55 units, what is the probability of a stockout in any given order cycle? Express your answer as a decimal to 4 decimal places using standard rounding rules. c) Given the probability of a stockout in problem b, how many times would expect a stockout to occur during the year if the reorder point = 55 units were used? Express your answer to 2 decimal places using standard rounding rules.
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