Question 2: Your firm uses a periodic review system for all SKUs classified, using ABC analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as A items. The demand for a specific SKU, currently classified as an A item, has been dropping. You have been asked to evaluate the impact of moving the item from continuous review to periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics are: Demand (D) = x1 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $3.00/unit/year Lead time (L) = x2 weeks Cycle service level = 95 percent Demand is normally distributed, with a standard deviation of weekly demand of 64 units. a. Use the EOQ to define the parameters of an appropriate continuous review and periodic review system for this item (round P to nearest integer) b. Which system requires more safety stock and by how much?

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Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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X1=29000 X2=5 I need a step by step answer please (not on excel please)
Question 2: Your firm uses a periodic review system for all SKUs classified, using ABC
analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as
A items. The demand for a specific SKU, currently classified as an A item, has been dropping.
You have been asked to evaluate the impact of moving the item from continuous review to
periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics
are:
Demand (D) = x1 units/year
Ordering cost (S) = $125.00/order
Holding cost (H) = $3.00/unit/year
Lead time (L) = x2 weeks
Cycle service level = 95 percent
Demand is normally distributed, with a standard deviation of weekly demand of 64 units.
a. Use the EOQ to define the parameters of an appropriate continuous review and periodic
review system for this item (round P to nearest integer)
b. Which system requires more safety stock and by how much?
Transcribed Image Text:Question 2: Your firm uses a periodic review system for all SKUs classified, using ABC analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as A items. The demand for a specific SKU, currently classified as an A item, has been dropping. You have been asked to evaluate the impact of moving the item from continuous review to periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics are: Demand (D) = x1 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $3.00/unit/year Lead time (L) = x2 weeks Cycle service level = 95 percent Demand is normally distributed, with a standard deviation of weekly demand of 64 units. a. Use the EOQ to define the parameters of an appropriate continuous review and periodic review system for this item (round P to nearest integer) b. Which system requires more safety stock and by how much?
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