E My Grades-2016 3 Sum Week 1 May 16 May 22 D https://blackboard utdLe MyInstitu

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E My Grades-2016 3 Sum Week 1 May 16 May 22 D https://blackboard utdLe MyInstitution-Blackbo Mch 11 Prob HW Invent c XYe The Annual Demand For X × × x c Dezto.mheducation.com/hm.tpx Summer 2016 Ch 11 Prob_HW Inventory Management instructions I help Question 4 (of 6) - E Save & Exit | | Submit value 10.00 points Problem 11-15 The annual demand for a product is 15,600 units. The weekly demand is 300 units with a standard deviation of 90 units. The cost to place an order is $32.00, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.20 per unit a. Find the reorder point necessary to provide a 98 percent service probability. (Round your answer to the nearest whole number.) Reorder point b. Suppose the production manager is asked to reduce the safety stock of this item by 55 percent. If she does so, what will the new service probability be? (Round your answer to 3 decimal places.) Service probability Hints References eBook & Resources Hint #1 Hint #2 Hint #3 Hint#4 O Ask me anything O DIe 6:39 PM 6/16/2016

Explanation / Answer

Annual Demand(D)=15600 Weekly demand (d)=300 Ordering Cost(O)=32 (H)Annual Holding Cost per unit=0.2 Std dev(Sd)=90 Lead Time (L)= 4 weeks a) Reorder Point= dL+z*Sd*sqrt(L) z value at 98% service probability=2.06 Reorder point=300*4+2.06*90*sqrt(90)= 2958.859 b) Current Safety stock= 2.06*90*sqrt(4)= 370.8 if the safety stock is reduced by 55% new safety stock=370.8*(1-0.55)= 166.86 hence z=166.86/(90*sqrt(4))= 0.927 hence service probability=82.30%

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