please answer part f. thank you. A gourmet coffee shop in downtown San Francisco is open 200 days a year and sells an average of 77 pounds of Kona coffee beans a day. (Demand can be assumed to be distributed normally with a standard deviation of 13 pounds per day). After ordering (fixed cost = $17 per order), beans are always delivered from Hawaii in exactly 4 days. Per-pound annual holding costs for the beans are $3. Refer to the standard normal table for z-values.a) What is the economic order quantity (EOQ) for Kona coffee beans? 418 pounds (round your response to the nearest whole number).b) What are the total annual holding costs of stock for Kona coffee beans? $627 (round your response to two decimal places).c) What are the total annual ordering costs for Kona coffee beans? $626.32 (round your response to two decimal places).d) Assume that management has specified that no more than a 1% risk of stockout during lead time is acceptable. What should the reorder point (ROP) be? 368.48 pounds (round your response to two decimal places).e) What is the safety stock needed to attain a 1% risk of stockout during lead time? 60.48 pounds (round your response to two decimal places).f) What is the annual holding cost of maintaining the level of safety stock needed to support a 1% risk? $____ (round your response to two decimal places).

Safety stock: It refers to the level of inventory that should be held to eliminate a certain level of uncertainty about inventory levels being out of stock that may lead to a loss in sales. Assume a corporation has a team dedicated to market research and the demand for an umbrella is anticipated to be approximately 1,000 units per month. Because demand is never steady, the corporation might elect to keep one hundred units on hand as a safety stock. Annual holding cost: The cost of keeping merchandise that hasn't sold is known as holding costs. Along with ordering and shortfall charges, these expenses make up a portion of overall inventory costs. The cost of damaged or spoilt goods, as well as storage space, labor, and insurance, are all included in a firm's holding expenses.Given, Standard deviation of demand σ = 13 days Lead time LT = 4 days At 1% risk, z value = 2.33 Average demand per day = 77 pounds Holding cost H = $3 Computation: First, determine the safety stock by multiplying the square root of lead by the product of the standard deviation of demand and the value of z at 1% risk. Safety stock = σdLT = z×LT×σd = 2.33×4×13 = 60.58 Now, calculate the holding cost by multiplying the holing cost by the safety stock. Annual holding cost = H×SS = $3×60.58= $181,74 Therefore, the annual holding cost for maintaining safety stock is $181,74.

Answered: f) What is the annual holding cost of…

Business

Operations Management

f) What is the annual holding cost of maintaining the level of safety stock needed to support a 1% risk? $ (round your response to two decimal places).

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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Question

please answer part f. thank you.

A gourmet coffee shop in downtown San Francisco is open 200 days a year and sells an average of 77 pounds of Kona coffee beans a day. (Demand can be assumed to be distributed normally with a standard deviation of 13 pounds per day). After ordering (fixed cost = $17 per order), beans are always delivered from Hawaii in exactly 4 days. Per-pound annual holding costs for the beans are $3. Refer to the standard normal table for z-values.

a) What is the economic order quantity (EOQ) for Kona coffee beans? 418 pounds (round your response to the nearest whole number).

b) What are the total annual holding costs of stock for Kona coffee beans? $627 (round your response to two decimal places).

c) What are the total annual ordering costs for Kona coffee beans? $626.32 (round your response to two decimal places).

d) Assume that management has specified that no more than a 1% risk of stockout during lead time is acceptable. What should the reorder point (ROP) be? 368.48 pounds (round your response to two decimal places).

e) What is the safety stock needed to attain a 1% risk of stockout during lead time? 60.48 pounds (round your response to two decimal places).

f) What is the annual holding cost of maintaining the level of safety stock needed to support a 1% risk? $____ (round your response to two decimal places).

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