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In: Advanced Math

A product with an annual demand of 900 units has Co = $18.50 and Ch =...

A product with an annual demand of 900 units has Co = $18.50 and Ch = $7. The demand exhibits some variability such that the lead-time demand follows a normal probability distribution with µ = 26 and σ = 6. Note: Use Appendix B to identify the areas for the standard normal distribution.

a) What is the recommended order quantity? Round your answer to the nearest whole number.

b) What are the reorder point and safety stock if the firm desires at most a 5% probability of stock-out on any given order cycle? If required, round your answers to the nearest whole number.

Record point =

Safety stock =

c ) If a manager sets the reorder point at 32, what is the probability of a stock-out on any given order cycle? If required, round your answer to four decimal places. P(Stockout/cycle) =

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The answer for above problem is explained below.

Colby Messinger answered 2 years ago
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