QUESTION 5 1 points Save Answer Cases of Watermelonrita at the local gas station

Question

QUESTION 5 1 points Save Answer Cases of Watermelonrita at the local gas station has a demand during lead time of 100 units, with a standard deviation during lead time of 25 units. What safety stock (approximately) provides a 95% service level? QUESTION 6 1 points Save Answer Consider a local club selling Christmas trees. If trees cost $15 and sell for $60 with no salvage value, what is the ideal service level? (leave answer as a decimal) QUESTION 7 1 points Save Answer 10. He sells papers for S0.50 and pays $0.30 for them. Unsold papers are trashed with no salvage value. How many papers should he order each day? Note the potential drawbacks to the order size proposed, which gives a relatively low service level (which could result in unhappy customers). Finding a way to get some salvage value could go a long way towards improving his business.

Explanation / Answer

5)

demand during lead time (d) = 100

standard deviation during lead time = 25

service level 95%

the corresponding z-score from standard normal distribution tables for probability 95%:

z = 1.645

safety stock = d + z*s

= 100 + 1.645*25

= 100 + 41.125

= 141.125 units

6) salvage value (s) = 0

selling price (p) = 60

cost price (c) = 15

cost of overage (Co)= p - c = 60 - 15 = 45

cost of underage (Cu)= c - s = 15 - 0 = 15

service level = Co/(Co+Cu)

= 45/(45+15)

= 45/60

= 0.75

service level = 75%

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