Given the following supply chain made up of a manufacturer and a supplier: suppl

Question

Given the following supply chain made up of a manufacturer and a supplier:

supplier: Cost=10/salvage=5 buyer: wholesale price=20/salvage=5 selling price 40

Demand is normally distributed with mean = 250 and standard deviation = 70. For the following questions, please use the Normal Tables with the z value given to two decimal places and the round up rule (pick the z value to give you the larger order quantity).

Q 17 Question 17 What is the optimal order quantity for the supplier in this supply chain? Select one: a. 219 b. 320 c. 272 d. 281 e. 264

Q 18 Question 18 What is the optimal order quantity for the entire supply chain? Select one: a. 360 b. 325 c. 310 d. 263 e. 260

Q 19 Question 19 What is the optimal buy back price for this supply chain given (assume shipping costs are zero) rounded to the nearest dollar? Select one: a. 22 b. 17 c. 35 d. 10 e. 15

Explanation / Answer

For Supplier,

Underage cost, Cu = 40 - 20 = 20

Overage cost, Co = 20-5 = 15

Critical ratio, F(z) = Cu/(Cu+Co) = 20/(20+15) = 0.5715

From Normal table, z = 0.20

Q17. Optimal order quantity for the supplier = mean + z*standard dev = 250 + 0.20*70 = 264

ANSWER: e. 264

Q18.

For Supply chain,

Underage cost, Cu = 40 - 10 = 30

Overage cost, Co = 10-5 = 5

Critical ratio, F(z) = Cu/(Cu+Co) = 30/(30+5) = 0.86

From Normal table, z = 1.07

Optimal order quantity for the entire supply chain = mean + z*standard dev = 250 + 1.07*70 = 325

ANSWER: b. 325

Q19. optimal buyback price for entire supply chain is equal to the cost

ANSWER: d. 10

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