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a. Find the reorder point necessary to provide a 98 percent service probability.

a. Find the reorder point necessary to provide a 98 percent service probability.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 11-19 The annual demand for a product is 15,600 units. The weekly demand is 300 units with a standard deviation of 90 units. The cost to place an order is $31.20, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.10 per unit. a. Find the reorder point necessary to provide a 98 percent service probability. (Use Excel's NORMSINV() function to find the z value. Do not round intermediate calculations. Round z value to 2 decimal places and final answer to the nearest whole number.) Reorder point 7603 * units b. Suppose the production manager is asked to reduce the safety stock of this item by 50 percent. If she does so, what will the new service probability be? (Use Excel's NORMSDIST() function to find the correct probability for your computed Z-value. Round "z" value to 2 decimal places and final answer to 1 decimal place.) Service probability 84.6 %
Transcribed Image Text:Problem 11-19 The annual demand for a product is 15,600 units. The weekly demand is 300 units with a standard deviation of 90 units. The cost to place an order is $31.20, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.10 per unit. a. Find the reorder point necessary to provide a 98 percent service probability. (Use Excel's NORMSINV() function to find the z value. Do not round intermediate calculations. Round z value to 2 decimal places and final answer to the nearest whole number.) Reorder point 7603 * units b. Suppose the production manager is asked to reduce the safety stock of this item by 50 percent. If she does so, what will the new service probability be? (Use Excel's NORMSDIST() function to find the correct probability for your computed Z-value. Round "z" value to 2 decimal places and final answer to 1 decimal place.) Service probability 84.6 %
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