Chadwick Shoe Co. produces and sells an e xcellent-quality walking shoe. After production, the shoes are distributed to 20 warehouses around the country. Each warehouse services approximately 100 stores in its region. Chadwick uses an EOQ model to determine the number of pairs of shoes to order for each warehouse from the factory. Annual demand for Warehouse OR2 is approximately 120,000 pairs of shoes. The ordering cost is $250 per order. The annual carrying cost of a pair of shoes is $2.40 per pair. Q. Although OR2’s average weekly demand is 2,500 pairs of shoes (120,000 , 12 months , 4 weeks), demand each week may vary with the following probability distribution: Total demand for 1 week 2,000 pairs 2,250 pairs 2,500 pairs 2,750 pairs 3,000 pairs Probability (sums to 1.00) 0.04 0.20 0.52 0.20 0.04 If a store wants shoes and OR2 has none in stock, OR2 can “rush” them to the store at an additional cost of $2 per pair. How much safety stock should Warehouse OR2 hold? How will this affect the reorder point and reorder quantity?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Chadwick Shoe Co. produces and sells an e xcellent-quality walking shoe. After production, the shoes are distributed to 20 warehouses around the country. Each warehouse services approximately 100 stores in its region. Chadwick uses an EOQ model to determine the number of pairs of shoes to order for each warehouse from the factory. Annual demand for Warehouse OR2 is approximately 120,000 pairs of shoes. The ordering cost is $250 per order. The annual carrying cost of a pair of shoes is $2.40 per pair.
Q. Although OR2’s average weekly demand is 2,500 pairs of shoes (120,000 , 12 months , 4 weeks), demand each week may vary with the following probability distribution:
Total demand for 1 week 2,000 pairs 2,250 pairs 2,500 pairs 2,750 pairs 3,000 pairs
Probability (sums to 1.00) 0.04 0.20 0.52 0.20 0.04
If a store wants shoes and OR2 has none in stock, OR2 can “rush” them to the store at an additional cost of $2 per pair. How much safety stock should Warehouse OR2 hold? How will this affect the reorder point and reorder quantity?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 5 images
