1 4 7. A pharmacy dispenses a generic drug at an average rate of 75 milligrams p

Question

1 4 7. A pharmacy dispenses a generic drug at an average rate of 75 milligrams per day An ot yet n of suggests that daily demand is approximately normal and has a standard deviation of 10 milligrams per day Lead time is 4 days and the (12 points) 2.00 1. Determine the reorder point (ROP) 2 How 3. What service level would a reorder point of 350 mg provide? much safety stock must 8 A cransman bul o types of bird houses, one for wrens and a second for bluebirds. Each wren birdhouse takes 4 hours or s t labor and 4 units of lumber. Each bluebird birdhouse takes 2 hours of labor and 12 units of lumber The craftsman has available 60 hours of labor and 120 units of lumber. Wren houses yield a profit of $ 6 each and bluebird houses yield a profit of $ 15 each. (10 points)

Explanation / Answer

7.

1.

Service level = 98%

Value of Z at this service level of 98% = 2.06 (as per the normal distribution table)

Reorder point = Daily demand* lead time + Z*S.D.*(Lead Time)^.5

Reorder point = 75*4 + 2.06*10*(4)^.5

Reorder point = 341.2 or 341 mg

2.

Safety stock = Z*S.D.*(Lead Time)^.5

Safety stock = 2.06*10*(4)^.5

Safety stock = 41.2 or 41 mg

3.

If Reorder point = 350

Then,

350 = 75*4 + Z*10*(4)^.5

Z = (350-75*4)/(10*2)

Z = 2.5

At this level of Z, service level = .9938 or 99.38%

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