Answered: a) What is the optimal level of safety…

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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Krishna cables requires aluminium for its factory. The probability distributions of the daily usage rate and the lead time for procurement are given below. (These distributions are independent.)

Daily Usage Rate in Tonnes: 2, 3, 4

Probability: 0.2, 0.6, 0.2

Lead time in days: 25, 35, 45

Probability: 0.2, 0.5, 0.3

The stockout cost is estimated at ₹8,000 per ton and the carrying cost is ₹2,000 per ton per year.

Question.1) a) What is the optimal level of safety stock?

b) What is the probability of stock out?

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