Page 3 of s 5. Inventory models in which the rate of demand is constant are call
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Page 3 of s 5. Inventory models in which the rate of demand is constant are called a.fixed models models. c, JIT models models Data for questions 16-18 The Gilroy Air-Conditioning Company is considering the purchase of a special shipment of portable air conditioners in Japan. Each unit will cost Gilroy $80, and it will be sold for $125. Gilroy does not want to carry surplus Assume that the air conditioner demand follows a normal probability distribution with -20 and 6-8. 6What is the probability for recommended order quantity a. 0.57 b. 0.61 c. 0.70 d. 0.60 17. What is the recommend order quantity? a. 21 b. 23 c. 22 d. 24 18. What is the probability that Gilroy will sell all unit it orders? a. 0.53 b. 0.40 c. 0.46 d. 0.5 9. Which cost would not be considered part of a holding cost? a. cost of capital b. shipping cost c. insurance cost d. warehouse overhead In the single-period inventory model with probabilistic demand, a. surplus items are not allowed to be carried in future inventory c. probabilities are used to calculate expected losses. . All of the alternatives are correctExplanation / Answer
16)
ost price = $80
Sales Price = $125
Profit Cp = 125 - 80 = $45
Loss Cl = 80 - 50 = 30
According to News vendor model
Q = Cp / (Cp + Cl)
= 45 / (45 + 30)
= 45 / 75
= 0.60
option d
18)
Suppose we order Q and let F denote the cumulative probability dist.
We want the value of the last item we order to equal the risk it exposes us to.
The value of the last item is ($125-$80)*(1-F(Q)). Note that (1-F(Q)) is the probability demand exceeds Q.
The risk the last item exposes us to is ($80 -$50)*F(Q).
So, we want F(Q) = 45/75 = .6
That means we want the likelihood that we stock out to be 0.4
OPTION B
17) RECOMENDED ORDER QUANTITY IS 22
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