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Freeport Corporation finds that demand for surfboards has average demand of 21 units per day, with a standard deviation of 3 units. Lead time from the supplier averages 14 days, with a standard deviation of 2 days. The item costs $61 and the inventory carrying cost is 25 percent. Use Table 7-2. a. Suppose management decides to offer a 97.5 percent service level; that is, it is willing to experience a stockout probability of 2.5 percent during the order cycle. How much safety stock should be carried? (Do not round intermediate calculations. Round up your answer to the next whole number.) Safety stock units b. How much is the annual inventory carrying cost of the safety stock because of this decision? (Round your answer to the nearest dollar amount.) Annual inventory carrying cost c. You decide that you want this company to give better service to its customers. You decide that a 97.72 percent service level is appropriate. How much safety stock must be carried to offer this service level? (Do not round intermediate calculations. Round up your answer to the next whole number.) Safety stock units

Freeport Corporation finds that demand for surfboards has average demand of 21 units per day, with a standard deviation of 3 units. Lead time from the supplier averages 14 days, with a standard deviation of 2 days. The item costs $61 and the inventory carrying cost is 25 percent. Use Table 7-2. a. Suppose management decides to offer a 97.5 percent service level; that is, it is willing to experience a stockout probability of 2.5 percent during the order cycle. How much safety stock should be carried? (Do not round intermediate calculations. Round up your answer to the next whole number.) Safety stock units b. How much is the annual inventory carrying cost of the safety stock because of this decision? (Round your answer to the nearest dollar amount.) Annual inventory carrying cost c. You decide that you want this company to give better service to its customers. You decide that a 97.72 percent service level is appropriate. How much safety stock must be carried to offer this service level? (Do not round intermediate calculations. Round up your answer to the next whole number.) Safety stock units

Practical Management Science
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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Freeport Corporation finds that demand for surfboards has average demand of 21 units per day, with a standard deviation of 3 units. Lead time from the supplier averages 14 days, with a standard deviation of 2 days. The item costs $61 and the inventory carrying cost is 25 percent. Use Table 7-2. a. Suppose management decides to offer a 97.5 percent service level; that is, it is willing to experience a stockout probability of 2.5 percent during the order cycle. How much safety stock should be carried? (Do not round intermediate calculations. Round up your answer to the next whole number.) Safety stock units b. How much is the annual inventory carrying cost of the safety stock because of this decision? (Round your answer to the nearest dollar amount.) Annual inventory carrying cost c. You decide that you want this company to give better service to its customers. You decide that a 97.72 percent service level is appropriate. How much safety stock must be carried to offer this service level? (Do not round intermediate calculations. Round up your answer to the next whole number.) Safety stock units
Transcribed Image Text:Freeport Corporation finds that demand for surfboards has average demand of 21 units per day, with a standard deviation of 3 units. Lead time from the supplier averages 14 days, with a standard deviation of 2 days. The item costs $61 and the inventory carrying cost is 25 percent. Use Table 7-2. a. Suppose management decides to offer a 97.5 percent service level; that is, it is willing to experience a stockout probability of 2.5 percent during the order cycle. How much safety stock should be carried? (Do not round intermediate calculations. Round up your answer to the next whole number.) Safety stock units b. How much is the annual inventory carrying cost of the safety stock because of this decision? (Round your answer to the nearest dollar amount.) Annual inventory carrying cost c. You decide that you want this company to give better service to its customers. You decide that a 97.72 percent service level is appropriate. How much safety stock must be carried to offer this service level? (Do not round intermediate calculations. Round up your answer to the next whole number.) Safety stock units
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