This is skill-building exercise. You should provide formulas, steps, or reasons to support your solutions. You...

This is skill-building exercise. You should provide formulas, steps, or reasons to support your solutions. You Must show how did you reach every number. Submissions with only the final solutions will not be given any credit.

The daily demand for a compact car at a car dealer in Chicago is normally distributed with a mean of 1.6 car and a standard deviation of 0.4 car. The lead time to receive an order from the car manufacturer is 5 days. The sales manager is willing to accept no more than 2 percent risk of stockout during lead time. Find the reorder point. How much of this is safety stock? What is the service level?

Expert Solution

Given that daily demand for a compact car at a car dealer in Chicago is normally distributed with a mean of 1.6 car and a standard deviation of 0.4 car.

The lead time to receive an order from the car manufacturer is 5 days.

The sales manager is willing to accept no more than 2 percent risk of stockout during lead time

The service level of willing to accept is 1 - 0.2 = 0.98

First we find the safety stock which is given below

From standard normal table, we find the value of z

Recorder Point

orchestra answered 2 years ago

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