1)Demand for walnut fudge ice cream at the Sweet Cream Dairy can be approximated
ID: 377665 • Letter: 1
Question
1)Demand for walnut fudge ice cream at the Sweet Cream Dairy can be approximated by a normal distribution with a mean of 18 gallons per week and a standard deviation of 6.7 gallons per week. The new manager desires a service level of 90 percent. Lead time is two days, and the dairy is open seven days a week. (Hint: Work in terms of weeks.) Use Table B and Table B1. a) How many days of supply are on hand at the ROP, assuming average demand?http://lectures.mhhe.com/connect/0073525251/tables/Table%20B.JPG http://lectures.mhhe.com/connect/0073525251/tables/Table%20B1.jpg 2)A company uses 80 circuit boards a day in a manufacturing process. The person who orders the boards follows this rule: Order when the amount on hand drops to 620 boards. Orders are delivered approximately six days after being placed. The delivery time is normal with a mean of six days and a standard deviation of 1.10 days. What is the probability that the supply of circuit boards will be exhausted before the order is received if boards are reordered when the amount on hand drops to 620 boards? http://lectures.mhhe.com/connect/0073525251/tables/P12-19.jpg 3) Garden Variety Flower Shop uses 750 clay pots a month. The pots are purchased at $2 each. Annual carrying costs per pot are estimated to be 30 percent of cost, and ordering costs are $20 per order. The manager has been using an order size of 1,500 flower pots. a) What additional annual cost is the shop incurring by staying with this order size? b)Other than cost savings, what benefit would using the optimal order quantity yield?
Explanation / Answer
1)
The weekly average demand (AVG) = 21 gallons per week
The weekly standard deviation of demand (STD) = 3.5 gallons per week
Lead time in weeks (L) = 2/7 = 0.285 weeks
For a 90 percent service level, the safety factor (z) = 1.29
Reorder point in a continuous review system
= L*Avg + z*Demand*(L)^0.5
=0.285*21+1.29*3.5*(0.285)^0.5
=8.395 gallons
Since every time an order is placed at 8.395 gallons. Also the daily demand is 21/7 = 3 gallons/day
The days of supply in hand would be = 8.395/3 =2.78 days
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