Furnco sells office chairs. Annual demand is normally distributed with a mean of 1040 chairs and a standard deviation of 50.99 chairs. It costs $100 for Furnco to place an order from the wholesaler, and the lead time is two weeks. They buy the chairs for $60 each and sell them for $100 each. Each stockout is estimated to cause a loss of $50 in future goodwill. The annual holding cost for each chair in inventory is 30% of its purchase cost. (a) Assuming all demand is backlogged, what are the reorder point and the safety stock level? (b) Assuming all stockouts result in lost sales, what are the new optimal reorder point and safety stock level? (c) Assume instead that demand is deterministic at 1040 chairs per year. What should the ordering policy be now?
Furnco sells office chairs. Annual demand is normally distributed with a mean of 1040 chairs and a standard deviation of 50.99 chairs. It costs $100 for Furnco to place an order from the wholesaler, and the lead time is two weeks. They buy the chairs for $60 each and sell them for $100 each. Each stockout is estimated to cause a loss of $50 in future goodwill. The annual holding cost for each chair in inventory is 30% of its purchase cost. (a) Assuming all demand is backlogged, what are the reorder point and the safety stock level? (b) Assuming all stockouts result in lost sales, what are the new optimal reorder point and safety stock level? (c) Assume instead that demand is deterministic at 1040 chairs per year. What should the ordering policy be now?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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I JUST NEED HELP WITH PART C!!!!!!
Transcribed Image Text:4) Furnco sells office chairs. Annual demand is normally distributed with a mean of 1040 chairs and a
standard deviation of 50.99 chairs. It costs $100 for Furnco to place an order from the wholesaler,
and the lead time is two weeks. They buy the chairs for $60 each and sell them for $100 each. Each
stockout is estimated to cause a loss of $50 in future goodwill. The annual holding cost for each
chair in inventory is 30% of its purchase cost.
(a) Assuming all demand is backlogged, what are the reorder point and the safety stock level?
(b) Assuming all stockouts result in lost sales, what are the new optimal reorder point and safety
stock level?
(c) Assume instead that demand is deterministic at 1040 chairs per year. What should the ordering
policy be now?
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