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A golf specialty wholesaler operates 50 weeks per year. Management is trying to determine an inventory control policy for its 1-irons, which have the following
A golf specialty wholesaler operates 50 weeks per year. Management is trying to determine an inventory control policy for its 1-irons, which have the following characteristics: Mean demand =2000 units/year Demand is normally distributed. Standard deviation of weekly demand =20 units Order cost =$72/ order Annual holding cost =$5 /unit Desired cycle-service level =90% Lead time =4 weeks The current on-hand inventory is 300 units, with no open orders and a backorder of 50 units. Currently, the company uses a continuous review (s, S) policy. a. What is the EOQ2 ( 15 points) b. What should be the safety stock? What should the reorder point be? (15 points) c. An inventory withdrawal of 20 units was just made. Is it time to reorder? (10 points) d. Please briefly describe the inventory control policy based on your calculation including the order quantity, when to order and how often to order. ( 20 points) Problem 2: (40 points) Every year in early October Steven King buys pumpkins of one size from a farmer in Maine and then hires an artist to carve bewitching faces in them. He then tries to sell them at his produce stand in a public market in Boston. The farmer charges Steven $1.50 per pumpkin and the artist is paid $2,00 per carved pumpkin. Steven sells a carved pumpkin for $15.00. Any pumpkins not sold by 5:00p.m. on Halloween are donated to Steven's favorite children's hospital. Steven pays the artist $1.00 per pumpkin to rush the pumpkins to the hospital for the youngsters to enjoy. Steven estimates the demand for his pumpkins this season to be approximately normally distributed with mean of 100 units and a standard deviation of 40 units. (a). How many pumpkins should Steven have available for sale? (30 points) (b). How likely will Steven experience a stock-out if he orders the amount you recommended in (a)? (10 points)
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