Homework Help is Here – Start Your Trial Now!
Business
Operations Management
3. The manager at Goodstone Tires, a distributor of tires in Illi- nois, uses a continuous review policy to manage inventory. The manager currently orders 10,000 tires when the inven- tory of tires drops to 6,000. Weekly demand for tires is nor- mally distributed, with a mean of 2,000 and a standard deviation of 500. The replenishment lead time for tires is two weeks. Each tire costs Goodstone $40, and the company sells each tire for $80. Goodstone incurs a holding cost of 25 per- cent. How much safety inventory does Goodstone currently carry? At what cost of understocking is the manager's current inventory policy justified? How much safety inventory should Goodstone carry if the cost of understocking is $80 per tire in lost current and future margin?

3. The manager at Goodstone Tires, a distributor of tires in Illi- nois, uses a continuous review policy to manage inventory. The manager currently orders 10,000 tires when the inven- tory of tires drops to 6,000. Weekly demand for tires is nor- mally distributed, with a mean of 2,000 and a standard deviation of 500. The replenishment lead time for tires is two weeks. Each tire costs Goodstone $40, and the company sells each tire for $80. Goodstone incurs a holding cost of 25 per- cent. How much safety inventory does Goodstone currently carry? At what cost of understocking is the manager's current inventory policy justified? How much safety inventory should Goodstone carry if the cost of understocking is $80 per tire in lost current and future margin?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
See similar textbooks
icon
Related questions
Question

How do I do question 3?

**Exercises** 1. **Green Thumb**, a manufacturer of lawn care equipment, has introduced a new product. Each unit costs $150 to manufacture, and the introductory price is $200. At this price, the anticipated demand is normally distributed, with a mean of μ = 100 and a standard deviation of σ = 40. Any unsold units at the end of the season are unlikely to be valuable and will be disposed of in a post-season sale for $50 each. It costs $20 to hold a unit in inventory for the entire season. How many units should Green Thumb manufacture for sale? What is the expected profit from this policy? On average, how many customers does Green Thumb expect to turn away because of stocking out? 2. The general manager at Green Thumb decides to conduct extensive market research for its new product. At the end of the market research, the manager estimates demand to be normally distributed, with a mean of μ = 100 and a standard deviation of σ = 15. How should Green Thumb alter its production plans in Exercise 1 as a result of the market research? How much increase in profit is it likely to observe? How does the improved forecast affect the demand lost by Green Thumb because of understocking? Use cost and price information from Exercise 1. 3. The manager at **Goodstone Tires**, a distributor of tires in Illinois, uses a continuous review policy to manage inventory. The manager currently orders 10,000 tires when the inventory of tires drops to 6,000. Weekly demand for tires is normally distributed, with a mean of 2,000 and a standard deviation of 500. The replenishment lead time for tires is two weeks. Each tire costs Goodstone $40, and the company sells each tire for $80. Goodstone incurs a holding cost of 25 percent. How much safety inventory does Goodstone currently carry? At what level of understocking is the manager's current inventory policy justified? How much safety inventory should Goodstone carry if the cost of understocking is $80 per tire in lost current and future margin? 4. **Champion** manufactures winter fleece jackets for sale in the United States. Demand for jackets during the season is normally distributed, with a mean of 20,000 and a standard deviation of 10,000. Each jacket sells for $60 and costs $30 to produce. Any leftover jackets at the end of the season are sold for $25 at the year
Transcribed Image Text:**Exercises** 1. **Green Thumb**, a manufacturer of lawn care equipment, has introduced a new product. Each unit costs $150 to manufacture, and the introductory price is $200. At this price, the anticipated demand is normally distributed, with a mean of μ = 100 and a standard deviation of σ = 40. Any unsold units at the end of the season are unlikely to be valuable and will be disposed of in a post-season sale for $50 each. It costs $20 to hold a unit in inventory for the entire season. How many units should Green Thumb manufacture for sale? What is the expected profit from this policy? On average, how many customers does Green Thumb expect to turn away because of stocking out? 2. The general manager at Green Thumb decides to conduct extensive market research for its new product. At the end of the market research, the manager estimates demand to be normally distributed, with a mean of μ = 100 and a standard deviation of σ = 15. How should Green Thumb alter its production plans in Exercise 1 as a result of the market research? How much increase in profit is it likely to observe? How does the improved forecast affect the demand lost by Green Thumb because of understocking? Use cost and price information from Exercise 1. 3. The manager at **Goodstone Tires**, a distributor of tires in Illinois, uses a continuous review policy to manage inventory. The manager currently orders 10,000 tires when the inventory of tires drops to 6,000. Weekly demand for tires is normally distributed, with a mean of 2,000 and a standard deviation of 500. The replenishment lead time for tires is two weeks. Each tire costs Goodstone $40, and the company sells each tire for $80. Goodstone incurs a holding cost of 25 percent. How much safety inventory does Goodstone currently carry? At what level of understocking is the manager's current inventory policy justified? How much safety inventory should Goodstone carry if the cost of understocking is $80 per tire in lost current and future margin? 4. **Champion** manufactures winter fleece jackets for sale in the United States. Demand for jackets during the season is normally distributed, with a mean of 20,000 and a standard deviation of 10,000. Each jacket sells for $60 and costs $30 to produce. Any leftover jackets at the end of the season are sold for $25 at the year
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Layout strategy
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Practical Management Science
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Business in Action
Business in Action
Operations Management
ISBN:
9780135198100
Author:
BOVEE
Publisher:
PEARSON CO
Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.
SEE MORE TEXTBOOKS