16-Screen Custom View 31000 points Problem 7-20 You have a one -ime chance to pu

Question

16-Screen Custom View 31000 points Problem 7-20 You have a one -ime chance to purchase an item for $5. The tem can be soid to customers tor 40 Ae one day, the tem has no savage value because t becomes rotten 516 to properly dispose of any unsold items You think you can sell 1,600 units in one day, but you that the standard deviation of demand tor the tem is 50 units Use Apeeosix at the end of the day It will then st you How many units shouid you order? (Round your intermediate calculations to 2 decimal places ane answer to the nearest whole number.) tieal Problem 7-20 A S

Explanation / Answer

Overage cost Co = Unit cost + Disposal cost –Salvage value =$5 + 16 -$0 = $21

Underage cost Cu = Unit selling price – unit cost = $40 - $5 =$35

Target service level = Cu/(Cu+Co) = 35/(21+35) = 0.625

Z at Target service level 0.625 = 0.32

Z = 0.32

Order quantity Q = Mean + Z*Standard deviation = 1600 + 0.32*50 = 1600 + 16 = 1616 units

They should order 1616 units

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.