d. (**) Now suppose the supplier of workbenches guarantees KraftyCity that the lead time will be a constant 3 weeks, with no variability (i.e., standard deviation of lead time = 0). Recalculate the reorder point, using the demand and service level information in problem 30-60. Is the reorder point higher or lower? Explain why.

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4. KraftyCity is a large retailer that sells power tools and other hardware supplies. One of its products is the KraftyMan workbench. Information on the workbench is as follows:

- Annual demand = 1,200
- Holding cost = $15 per year
- Ordering cost = $200 per order

a. (*) What is the economic order quantity for the workbench?

b. (**) Suppose that KraftyCity has to pay $50 per workbench for orders under 200 but only $42 per workbench for orders of 201 or more. Using the information provided in problem 3-4, what order quantity should KraftyCity use?

c. (*) The lead time for KraftyCity workbenches is 3 weeks, with a standard deviation of 1.2 weeks, and the average weekly demand is 24, with a standard deviation of 8 workbenches. What should the reorder point be if KraftyCity wants to provide a 95% service level?

d. (**) Now suppose the supplier of workbenches guarantees KraftyCity that the lead time will be a constant 3 weeks, with no variability (i.e., standard deviation of lead time = 0). Recalculate the reorder point, using the demand and service level information in problem 3-6. Is the reorder point higher or lower? Explain why.
Transcribed Image Text:4. KraftyCity is a large retailer that sells power tools and other hardware supplies. One of its products is the KraftyMan workbench. Information on the workbench is as follows: - Annual demand = 1,200 - Holding cost = $15 per year - Ordering cost = $200 per order a. (*) What is the economic order quantity for the workbench? b. (**) Suppose that KraftyCity has to pay $50 per workbench for orders under 200 but only $42 per workbench for orders of 201 or more. Using the information provided in problem 3-4, what order quantity should KraftyCity use? c. (*) The lead time for KraftyCity workbenches is 3 weeks, with a standard deviation of 1.2 weeks, and the average weekly demand is 24, with a standard deviation of 8 workbenches. What should the reorder point be if KraftyCity wants to provide a 95% service level? d. (**) Now suppose the supplier of workbenches guarantees KraftyCity that the lead time will be a constant 3 weeks, with no variability (i.e., standard deviation of lead time = 0). Recalculate the reorder point, using the demand and service level information in problem 3-6. Is the reorder point higher or lower? Explain why.
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