Question

In: Operations Management

p .00 .01 .02 .03 .04 .05 .06 .07 .08 .09 .0 .5000 .5040 .5080 .5120...

p .00 .01 .02 .03 .04 .05 .06 .07 .08 .09

.0 .5000 .5040 .5080 .5120 .5160 .5199 .5239 .5279 .5319 .5359

.1 .5398 .5438 .5478 .5517 .5557 .5596 .5636 .5675 .5714 .5753

.2 .5793 .5832 .5871 .5910 .5948 .5987 .6026 .6064 .6103 .6141

.3 .6179 .6217 .6255 .6293 .6331 .6368 .6406 .6443 .6480 .6517

.4 .6554 .6591 .6628 .6664 .6700 .6736 .6772 .6808 .6844 .6879

.5 .6915 .6950 .6985 .7019 .7054 .7088 .7123 .7157 .7190 .7224

.6 .7257 .7291 .7324 .7357 .7389 .7422 .7454 .7486 .7517 .7549

.7 .7580 .7611 .7642 .7673 .7704 .7734 .7764 .7794 .7823 .7852

.8 .7881 .7910 .7939 .7967 .7995 .8023 .8051 .8078 .8106 .8133

.9 .8159 .8186 .8212 .8238 .8264 .8289 .8315 .8340 .8365 .8389

1.0 .8413 .8438 .8461 .8485 .8508 .8531 .8554 .8577 .8599 .8621

1.1 .8643 .8665 .8686 .8708 .8729 .8749 .8770 .8790 .8810 .8830

1.2 .8849 .8869 .8888 .8907 .8925 .8944 .8962 .8980 .8997 .9015

1.3 .9032 .9049 .9066 .9082 .9099 .9115 .9131 .9147 .9162 .9177

1.4 .9192 .9207 .9222 .9236 .9251 .9265 .9279 .9292 .9306 .9319

1.5 .9332 .9345 .9357 .9370 .9382 .9394 .9406 .9418 .9429 .9441

1.6 .9452 .9463 .9474 .9484 .9495 .9505 .9515 .9525 .9535 .9545

1.7 .9554 .9564 .9573 .9582 .9591 .9599 .9608 .9616 .9625 .9633

1.8 .9641 .9649 .9656 .9664 .9671 .9678 .9686 .9693 .9699 .9706

1.9 .9713 .9719 .9726 .9732 .9738 .9744 .9750 .9756 .9761 .9767

2.0 .9772 .9778 .9783 .9788 .9793 .9798 .9803 .9808 .9812 .9817

2.1 .9821 .9826 .9830 .9834 .9838 .9842 .9846 .9850 .9854 .9857

2.2 .9861 .9864 .9868 .9871 .9875 .9878 .9881 .9884 .9887 .9890

2.3 .9893 .9896 .9898 .9901 .9904 .9906 .9909 .9911 .9913 .9916

2.4 .9918 .9920 .9922 .9925 .9927 .9929 .9931 .9932 .9934 .9936

2.5 .9938 .9940 .9941 .9943 .9945 .9946 .9948 .9949 .9951 .9952

2.6 .9953 .9955 .9956 .9957 .9959 .9960 .9961 .9962 .9963 .9964

2.7 .9965 .9966 .9967 .9968 .9969 .9970 .9971 .9972 .9973 .9974

2.8 .9974 .9975 .9976 .9977 .9977 .9978 .9979 .9979 .9980 .9981

2.9 .9981 .9982 .9982 .9983 .9984 .9984 .9985 .9985 .9986 .9986

3.0 .9987 .9987 .9987 .9988 .9988 .9989 .9989 .9989 .9990 .9990

3.1 .9990 .9991 .9991 .9991 .9992 .9992 .9992 .9992 .9993 .9993

3.2 .9993 .9993 .9994 .9994 .9994 .9994 .9994 .9995 .9995 .9995

3.3 .9995 .9995 .9995 .9996 .9996 .9996 .9996 .9996 .9996 .9997

3.4 .9997 .9997 .9997 .9997 .9997 .9997 .9997 .9997 .9997 .9998

A barista shop in NYC is open 200 days per year and sells an average of 77 pounds of Koko coffee beans a day. (Demand is assumed to be normally distributed with a standard deviation of 15 pounds per day). After ordering, with a fixed cost of $19 per order, beans are always delivered from Uganda in exactly 4 days. Annual holding costs for the beans are $3/pound.

Note: round all answers to two (2) decimal places and don't type commas or separators, only a period to indicate decimals.

a) The economic order quantity (EOQ) for Koko coffee beans is: Blank 1. Fill in the blank, read surrounding text. pounds per order.

b) The total annual holding costs of stock for Koko coffee beans are: $ Blank 2. Fill in the blank, read surrounding text. .

c) The total annual ordering costs for Koko coffee beans are: $ Blank 3. Fill in the blank, read surrounding text. .

d) Assume that management has specified that no more than a 1% risk of stockout during lead time is acceptable. The reorder point (ROP) is: Blank 4. Fill in the blank, read surrounding text. pounds.

e) The safety stock needed to attain a 1% risk of stockout during lead time is: Blank 5. Fill in the blank, read surrounding text. pounds.

Solutions

Expert Solution

A barista shop in NYC is open 200 days per year

Per day demand =DD= 77 pounds

Annual Demand = D=200*77= 15400 pounds

standard deviation= σ= 15 pounds per day

Cost of Ordering =Co=$19 per order,

Lead time= L= 4 days

Annual holding cost = Ch= $3/pound

EOQ is

=441.66 Pounds per order

a.The economic order quantity (EOQ) for Koko coffee beans is: 441.66 Pounds per order

b. total annual holding costs is

= (Q/2)* Ch

= (441.66/2)*3

=662.49

b.The total annual holding costs of stock for Koko coffee beans are $662.49

c. The total annual ordering costs is

=number of orders * Co

No. of orders = (D/Q) = 15400/441.66 = 34.87

= 34.87 *19

=662.53

c.The total annual ordering costs for Koko coffee beans are: $662.53

ROP can be calculated as

ROP = SS + Lead time demand

= Z * σL + DD * Lead time

1% stockout is allowed so expected availability = 99% and Z for 99% CSL = 2.33

σ = Standard deviation = 15 pounds per day

σL = Standard deviation of demand over lead time = = =30

ROP = 2.33 *30 +77*4

=377.90

d.The reorder point (ROP) is:377.90 pounds

e. The safety stock needed to attain a 1% risk of stockout during lead time is

=Z * σL

= 2.33 * 30 = 69.9

e. The safety stock needed to attain a 1% risk of stockout during lead time is 69.9 pounds

======================================END==============================================

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