A company sells 3-ring binders by the box (5 binders in each box) through its membership club stores.  Daily demand for these binders is normally distributed with a mean of 50 boxes and a standard deviation of 5 boxes. When the company orders more binders, the ordering cost is $42 per order which takes, on average, 7 days to arrive with a standard deviation of 2 days. Each box of binders costs $7.20 and the holding rate is 24% per year.  Assume the store is open 360 days a year.What is the EOQ (Q*)? What is the mean and standard deviation of demand during the lead time?The company wants the probability of stocking out to be no more than 5%, what is the safety factor (the z-value)?The company wants the probability of stocking out to be no more than 5%, what is the reorder point and how much safety stock should the company maintain?

Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
18th Edition
ISBN:9780079039897
Author:Carter
Publisher:Carter
Chapter10: Statistics
Section10.4: Distributions Of Data
Problem 19PFA
Question

A company sells 3-ring binders by the box (5 binders in each box) through its membership club stores.  Daily demand for these binders is normally distributed with a mean of 50 boxes and a standard deviation of 5 boxes. When the company orders more binders, the ordering cost is $42 per order which takes, on average, 7 days to arrive with a standard deviation of 2 days. Each box of binders costs $7.20 and the holding rate is 24% per year.  Assume the store is open 360 days a year.

What is the EOQ (Q*)?

What is the mean and standard deviation of demand during the lead time?

The company wants the probability of stocking out to be no more than 5%, what is the safety factor (the z-value)?

The company wants the probability of stocking out to be no more than 5%, what is the reorder point and how much safety stock should the company maintain? 

Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Recommended textbooks for you
Glencoe Algebra 1, Student Edition, 9780079039897…
Glencoe Algebra 1, Student Edition, 9780079039897…
Algebra
ISBN:
9780079039897
Author:
Carter
Publisher:
McGraw Hill
Big Ideas Math A Bridge To Success Algebra 1: Stu…
Big Ideas Math A Bridge To Success Algebra 1: Stu…
Algebra
ISBN:
9781680331141
Author:
HOUGHTON MIFFLIN HARCOURT
Publisher:
Houghton Mifflin Harcourt