Floyd Distributors, Inc., provides a variety of auto parts to small local garages. Floyd purchases parts from manufacturers according to the EOQ model and then ships the parts from a regional warehouse direct to its customers. For a particular type of muffler, Floyd's EOQ analysis recommends orders with Q* = 20 to satisfy an annual demand of 180 mufflers. Floyd's has 250 working days per year, and the lead time averages 15 days. Note: Use Appendix B to identify the areas for the standard normal distribution. What is the reorder point if Floyd assumes a constant demand rate? If required, round your answer up to the nearest whole number. r = fill in the blank 1 Suppose that an analysis of Floyd's muffler demand shows that the lead-time demand follows a normal probability distribution with µ = 12 and σ = 2.2. If Floyd's management can tolerate one stock-out per year, what is the revised reorder point? If required, round your answer up to the nearest whole number. r = fill in the blank 2 What is the safety stock for part (b)? If Ch = $6/unit/year, what is the extra cost due to the uncertainty of demand? Safety Stock = fill in the blank 3 units Added Cost = $ fill in the blank 4/ year
Continuous Probability Distributions
Probability distributions are of two types, which are continuous probability distributions and discrete probability distributions. A continuous probability distribution contains an infinite number of values. For example, if time is infinite: you could count from 0 to a trillion seconds, billion seconds, so on indefinitely. A discrete probability distribution consists of only a countable set of possible values.
Normal Distribution
Suppose we had to design a bathroom weighing scale, how would we decide what should be the range of the weighing machine? Would we take the highest recorded human weight in history and use that as the upper limit for our weighing scale? This may not be a great idea as the sensitivity of the scale would get reduced if the range is too large. At the same time, if we keep the upper limit too low, it may not be usable for a large percentage of the population!
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Floyd Distributors, Inc., provides a variety of auto parts to small local garages. Floyd purchases parts from manufacturers according to the EOQ model and then ships the parts from a regional warehouse direct to its customers. For a particular type of muffler, Floyd's EOQ analysis recommends orders with Q* = 20 to satisfy an annual demand of 180 mufflers. Floyd's has 250 working days per year, and the lead time averages 15 days.
Note: Use Appendix B to identify the areas for the standardnormal distribution .- What is the reorder point if Floyd assumes a constant demand rate? If required, round your answer up to the nearest whole number.
r = fill in the blank 1 - Suppose that an analysis of Floyd's muffler demand shows that the lead-time demand follows a normal probability distribution with µ = 12 and σ = 2.2. If Floyd's management can tolerate one stock-out per year, what is the revised reorder point? If required, round your answer up to the nearest whole number.
r = fill in the blank 2 - What is the safety stock for part (b)? If Ch = $6/unit/year, what is the extra cost due to the uncertainty of demand?
Safety Stock = fill in the blank 3 units
Added Cost = $ fill in the blank 4/ year
- What is the reorder point if Floyd assumes a constant demand rate? If required, round your answer up to the nearest whole number.
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