A distributor of large appliances needs to determine the order quantities and reorder points for the various products it carries. The following data refer to a specific refrigerator in its product line:
Cost to place an order $100
Holding cost 20 percent of product cost per year
Cost of refrigerator $500 each
Annual demand 500 units
Standard deviation during lead time 10
Lead time 7 days
Consider an even daily demand and a 365-day year.
a. What is the economic order quantity?
b. If the distributor wants a 97 percent service probability, what reorder point, R, should be used?
Answers: 2
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A distributor of large appliances needs to determine the order quantities and reorder points for the...
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