A drugstore uses fixed-order cycles for many of the items it stocks. The manager
ID: 457952 • Letter: A
Question
A drugstore uses fixed-order cycles for many of the items it stocks. The manager wants a service level of .98. The order interval is 10 days, and lead time is 2 days. Average demand for one item is 66 units per day, and the standard deviation of demand is 6 units per day. Given the on-hand inventory at the reorder time for each order cycle shown in the following table. Use Table.
Determine the order quantities for cycles 1, 2, and 3: (Round your answers to the nearest whole number)
Cycle On Hand 1 47 2 7 3 100Explanation / Answer
Cycle On Hand 1 47 2 7 3 100 lead time(L)=2 days Period(p)=10 days Std dev=6 units per day Daily Demand(d)=66 unit/day z value at 98% service level=2.05 Q=d*(p+L)+z*stdev*sqrt(p+L)-I where Q=qty to be ordered I=on hand inventory hence order quantities for Cycle Units 1 66*(10+2)+2.05*6*sqrt(10+2)-47= 788 2 66*(10+2)+2.05*6*sqrt(10+2)-7= 828 3 66*(10+2)+2.05*6*sqrt(10+2)-100= 735
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