Watch Entice sells high end watches. The annual demand for the company’s product is 57,000 units.Ordering costs are $500 per order and carrying costs are $90 per unit, including $40 in the opportunitycost of holding inventory. It currently takes 2 weeks to supply an order to the store. The following tableshows the probability distribution of various demand levels during the 2-week purchase-order lead time:Total Demand Probability of Demand800 0.05900 0.21,000 0.51,100 0.21,200 0.05 Watch Entice does not hold any safety stock. If the company runs of stock, it has to rush order thecomputers at an additional cost of $10 per computer. What is the stock out cost?A. $21,600B. $14,400C. $7,200D. $17,400
Watch Entice sells high end watches. The annual demand for the company’s product is 57,000 units.Ordering costs are $500 per order and carrying costs are $90 per unit, including $40 in the opportunitycost of holding inventory. It currently takes 2 weeks to supply an order to the store. The following tableshows the probability distribution of various demand levels during the 2-week purchase-order lead time:Total Demand Probability of Demand800 0.05900 0.21,000 0.51,100 0.21,200 0.05 Watch Entice does not hold any safety stock. If the company runs of stock, it has to rush order thecomputers at an additional cost of $10 per computer. What is the stock out cost?A. $21,600B. $14,400C. $7,200D. $17,400
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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Watch Entice sells high end watches. The annual demand for the company’s product is 57,000 units.
Ordering costs are $500 per order and carrying costs are $90 per unit, including $40 in the opportunity
cost of holding inventory. It currently takes 2 weeks to supply an order to the store. The following table
shows the probability distribution of various demand levels during the 2-week purchase-order lead time:
Total Demand Probability of Demand
800 0.05
900 0.2
1,000 0.5
1,100 0.2
1,200 0.05
Watch Entice does not hold any safety stock. If the company runs of stock, it has to rush order the
computers at an additional cost of $10 per computer. What is the stock out cost?
A. $21,600
B. $14,400
C. $7,200
D. $17,400
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