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A firm faces a demand of 40,000 units per month for one of its lines of stock. The firm's cost of holding stock is £2 per unit of average stock per month, and it costs the firm a total of £100 every time it orders and acquires a new shipment of stock. The firm is willing to face stock-outs and the cost of such is £6 per unit of average stock-out per month. Assuming the firm attempts to minimise overall inventory-related costs, how large (approximately) will the firm allow its stock- outs to become before each new stock delivery arrives? a. 577 units b. 981 units c. 782 units d. 904 units

A firm faces a demand of 40,000 units per month for one of its lines of stock. The firm's cost of holding stock is £2 per unit of average stock per month, and it costs the firm a total of £100 every time it orders and acquires a new shipment of stock. The firm is willing to face stock-outs and the cost of such is £6 per unit of average stock-out per month. Assuming the firm attempts to minimise overall inventory-related costs, how large (approximately) will the firm allow its stock- outs to become before each new stock delivery arrives? a. 577 units b. 981 units c. 782 units d. 904 units

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...
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A firm faces a demand of 40,000 units per month for one of its lines of stock. The firm's cost of holding stock is £2 per unit of average stock per month, and it costs the firm a total of £100 every time it orders and acquires a new shipment of stock. The firm is willing to face stock-outs and the cost of such is £6 per unit of average stock-out per month. Assuming the firm attempts to minimise overall inventory-related costs, how large (approximately) will the firm allow its stock- outs to become before each new stock delivery arrives? a. 577 units b. 981 units C. 782 units d. 904 units
Transcribed Image Text:A firm faces a demand of 40,000 units per month for one of its lines of stock. The firm's cost of holding stock is £2 per unit of average stock per month, and it costs the firm a total of £100 every time it orders and acquires a new shipment of stock. The firm is willing to face stock-outs and the cost of such is £6 per unit of average stock-out per month. Assuming the firm attempts to minimise overall inventory-related costs, how large (approximately) will the firm allow its stock- outs to become before each new stock delivery arrives? a. 577 units b. 981 units C. 782 units d. 904 units
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