Forest Restaraunt stocks a red Brazilian table wine purchased from a nearby city

Question

Forest Restaraunt stocks a red Brazilian table wine purchased from a nearby city. The daily demand for the wine at the restaurant is normally distributed with the mean of 20 bottles standard deviation of 5 bottles. The wine merchant send a representative to check the restaurants wine cellar every 30 days. During a visit, there were 25 bottles in stock. The lead time to receive an order is 2 days. The manager has requested an order size that will enable him to limit the probability of a stock out to 2 percent. What inventory model should be used? A. EOQ B. EPQ C. Q,R model with random demand D. Periodic review
How many bottles should be orders during that particular visit? A. 652 B. 681 C. 673 D. 662
What is the safety stock? A. 66 bottles B. 47 C. 37 D. 58 Forest Restaraunt stocks a red Brazilian table wine purchased from a nearby city. The daily demand for the wine at the restaurant is normally distributed with the mean of 20 bottles standard deviation of 5 bottles. The wine merchant send a representative to check the restaurants wine cellar every 30 days. During a visit, there were 25 bottles in stock. The lead time to receive an order is 2 days. The manager has requested an order size that will enable him to limit the probability of a stock out to 2 percent. What inventory model should be used? A. EOQ B. EPQ C. Q,R model with random demand D. Periodic review
How many bottles should be orders during that particular visit? A. 652 B. 681 C. 673 D. 662
What is the safety stock? A. 66 bottles B. 47 C. 37 D. 58 A. EOQ B. EPQ C. Q,R model with random demand D. Periodic review
How many bottles should be orders during that particular visit? A. 652 B. 681 C. 673 D. 662
What is the safety stock? A. 66 bottles B. 47 C. 37 D. 58

Explanation / Answer

1.

D. Periodic Review

2.

Reorder Level = Demand During lead time + Safety Stock

                                = (Average Demand * (Lead time + Period)) + (z * Std Deviation * Sqrt(Lead time + Period)

= (20 *32) + (2.05 * 5 * Sqrt(32)) = 640 + 58 = 698

Number of bottles should be order = 698 – 25 = 673

3.

Safety stock = 58

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