A regional distributor purchases discontinued appliances from various suppliers and then sells themon demand to retailers in the region. The distributor operates 5 days per week, 52 weeks per year. Onlywhen it is open for business can orders be received. The following data are estimated for a counter-topmixer:Average daily demand 1d2 = 100 mixersStandard deviation of daily demand 1sd2 = 30 mixersLead time 1L2 = 3 daysHolding cost 1H2 = $9.40>unit>yearOrdering cost 1S2 = $35>orderCycle@service level = 92 percentThe distributor uses a continuous review Q system.a. What order quantity Q, and reorder point, R, should be used?b. What is the total annual cost of the system?c. If on-hand inventory is 40 units, one open order for 440 mixers is pending, and no backorders exist,should a new order be placed?
A regional distributor purchases discontinued appliances from various suppliers and then sells them
on demand to retailers in the region. The distributor operates 5 days per week, 52 weeks per year. Only
when it is open for business can orders be received. The following data are estimated for a counter-top
mixer:
Average daily demand 1d2 = 100 mixers
Standard deviation of daily demand 1sd2 = 30 mixers
Lead time 1L2 = 3 days
Holding cost 1H2 = $9.40>unit>year
Ordering cost 1S2 = $35>order
Cycle@service level = 92 percent
The distributor uses a continuous review Q system.
a. What order quantity Q, and reorder point, R, should be used?
b. What is the total annual cost of the system?
c. If on-hand inventory is 40 units, one open order for 440 mixers is pending, and no backorders exist,
should a new order be placed?
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