Answered: A health and nutrition store stocks a…

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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Question

A health and nutrition store stocks a multivitamin with an annual demand of 1,000 bottles has

C_o = $26.50 and C_h = $7. The demand exhibits some variability such that the lead-time demand follows a normal probability distribution with ? = 25 and ? = 5.

(a)

What is the recommended order quantity? (Round your answer to the nearest integer.):________

(b)

What are the reorder point and safety stock if the store desires at most a 6% probability of stock-out on any given order cycle? (Round your answers to the nearest integer.)

reorder point:________

safety stock:________

(c)

If a manager sets the reorder point at 30, what is the probability of a stock-out on any given order cycle? (Round your answer to four decimal places.):________

How many times would you expect a stock-out during the year if this reorder point were used? (Round your answer to the nearest integer.):________

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

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