3:48 ezto.mheducation.com E connect 2 Problem 11-20 Daily demand for a product i

Question

3:48 ezto.mheducation.com E connect 2 Problem 11-20 Daily demand for a product is 50 units, wilth a standard deviation of 35 units. The review period is 5 days and the lead time is 4 days. At the time of review there are 60 units in stock 95 percent service probability is desired, how many units should be ordered? (Use Excel's NORMSINVO funetion to find the correct critical value for the given a- level. Do not round intermediate calculations. Round value to 2 decimal places and final answer to the nearest whole number)

Explanation / Answer

Demand (D) = 50 units

Standard deviation (SD) = 35 units

Review period / Order Interval (OI) = 5

Lead Time (LT) = 4

Amount on hand (A) = 60

z value for 95% service level using NORMSINV() = 1.64

Quantity = D*(OI+LT) + z*SD*sqrt(OI+LT) - A = 50*(5+4) + 1.64*35*sqrt(5+4) - 60 = 450 + 172.2 - 60 = 562

Ans: 562

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