Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The Inventory Manager (IM) of McDuff Enterprises is assessing the impact of a stockout and wants to quantify that impact; he knows his average customer
The Inventory Manager (IM) of McDuff Enterprises is assessing the impact of a stockout and wants to quantify that impact; he knows his average customer places an order once a month for one item. The average sale for an item of stock is $100 and the average cost from McDuff Enterprises supplier is $80. Assuming 3 potential scenarios when there is a stockout: The customer is brand-loyal and will wait until McDuff Enterprises gets stock, so a delayed sale; the IM assess the probability of this scenario at 10%. The customer goes to a competitor this month, but is brand-loyal to McDuff Enterprises for the remainder of the year; the IM assess the probability of this scenario at 40%. The customer goes to a competitor this month and stays with the competitor for future purchases; the IM assess the probability of this scenario at 50%. What is the probable cost of a stockout for McDuff Enterprises over the year? (8 marks) If the cost of holding an additional 10 units of Inventory is $200, would it be worth adding 10 units of Safety inventory to prevent a stockout, if the Safety inventory prevents 20 stockout situations over the course of
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