Answered: Rex manufacturing purchases a printed…

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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Rex manufacturing purchases a printed circuit board for use in its automatic, computerized, robot
bartender. The manufacturing facility has placed the following monthly demands on purchased
goods inventory during the past year.

Month	1	2	3	4	5	6	7	8	9	10	11	12
Demand	205	193	197	220	202	226	179	197	186	202	179	214

This demand schedule can be assumed to be random, to follow a normal distribution, and to be
representative of what will occur in the future. Rex estimates that a fixed cost of $300 is
incurred each time an order is placed for the boards, and that the inventory holding cost is about
20% per year of the value of inventory. Each board has an estimated value of $192 at the point
of storage. The lead time on purchase orders is (1/5) month.
Part A: What is the EOQ?
Part B: What is the safety stock required to assure the management that the chance of a stock out
in a cycle is no more than 1%?
Part C: What is the reorder level?

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

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