help that it oosts $15 each time an order is placed, and holding costs are 15 pe
ID: 381696 • Letter: H
Question
help that it oosts $15 each time an order is placed, and holding costs are 15 percent of the purchase price. It takes four weeks standard deviation of 20 botles. for an order to arive. Weekdy demand is 112 bottles (closed two weeks per yearj with a Ben would like to use an inventory system that minimizes inventory cost and will provide a 98 percent service probability a. What is the economic quantity for Ben to order? (Round your answer to the nearest whole number) b. At what inventory level shouid he place an order? (Use Excel's NORMSINV decimal places and final answer to the nearest whole number) unction to find the correct erisical value for the given o-level. Do not round intermediate calculations. Round " value to 2 20Explanation / Answer
Annual demand D = 5600 bottles
Unit Cost, P = $ 9
Order cost, S = $ 15
Holding cost, H = 9*15% = $ 1.35
Weekly demand, d = 112 bottles
Std dev of weekly demand, s = 20 bottles
Lead time, L = 4 weeks
Service level = 98%
a) Economic order quantity = (2*D*S/H) = (2*5600*15/1.35) = 353 bottles
b) Critical value (z) for 98% service level = NORMSINV(0.98) = 2.05
Reorder point = d*L + z*s*L = 112*4 + 2.05*20*4 = 530 bottles
Inventory level = 530 bottles
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