The annual demand for a product is 15,600 units. The weekly demand is 300 units with a standard deviation of 90 units. The cost to place an order is $31.20, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.10 per unit. a. Find the reorder point necessary to provide a 98 percent service probability. (Use Excel's NORMSINV() function to find the z value. Do not round intermediate calculations. Round z value to 2 decimal places and final answer to the nearest whole number.) Reorder point 1619 units b. Suppose the production manager is asked to reduce the safety stock of this item by 50 percent. If she does so, what will the new service probability be? (Use Excel's NORMSDIST() function to find the correct probability for your computed Z-value. Round "z" value to 2 decimal places and final answer to 1 decimal place.)
The annual demand for a product is 15,600 units. The weekly demand is 300 units with a standard deviation of 90 units. The cost to place an order is $31.20, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.10 per unit. a. Find the reorder point necessary to provide a 98 percent service probability. (Use Excel's NORMSINV() function to find the z value. Do not round intermediate calculations. Round z value to 2 decimal places and final answer to the nearest whole number.) Reorder point 1619 units b. Suppose the production manager is asked to reduce the safety stock of this item by 50 percent. If she does so, what will the new service probability be? (Use Excel's NORMSDIST() function to find the correct probability for your computed Z-value. Round "z" value to 2 decimal places and final answer to 1 decimal place.)
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
Problem 1PS
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Transcribed Image Text:The image contains an educational exercise focusing on inventory management and probability calculations using Excel functions.
**Problem Statement:**
The annual demand for a product is 15,600 units. The weekly demand is 300 units with a standard deviation of 90 units. The cost to place an order is $31.20, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.10 per unit.
**Tasks:**
a. **Find the reorder point necessary to provide a 98 percent service probability.**
- Guidance: Use Excel's NORMSINV() function to find the z value.
- Instructions: Do not round intermediate calculations. Round the z value to 2 decimal places and the final answer to the nearest whole number.
- **Reorder point**: 1619 units (shown with a red box marking the final value).
b. **Suppose the production manager is asked to reduce the safety stock of this item by 50 percent. If she does so, what will the new service probability be?**
- Guidance: Use Excel's NORMSDIST() function to find the correct probability for your computed Z-value.
- Instructions: Round "z" value to 2 decimal places and the final answer to 1 decimal place.
- **Service probability**: 84.6%
These tasks involve using statistical functions in Excel to manage inventory efficiently and understand the impact of adjusting safety stock on service levels.
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