The home appliance department of a large department store is using a lot size reorder point system to control the replacement of a particular unit. The store sells an average of 15 units each week. Weekly demand follows a normal distribution with variance of 36 units per week. The store pays $20 for each unit. Fixed cost is $35 per order. The accounting department recommends a 20% interest rate per year for the cost of capital for the holding cost. If a customer demands the item when is out of stock, the customer will generally go elsewhere. Penalty costs are estimated to be about $35 per unit. Replenishment lead time is three months. Assume 1 year = 52 weeks a) Transform demand in units per year. Find (QR) optimal values after 3 iterations (Qo. R₁. Q1. R₂. Q2, R3, Q3). b) Calculate total cost
The home appliance department of a large department store is using a lot size reorder point system to control the replacement of a particular unit. The store sells an average of 15 units each week. Weekly demand follows a normal distribution with variance of 36 units per week. The store pays $20 for each unit. Fixed cost is $35 per order. The accounting department recommends a 20% interest rate per year for the cost of capital for the holding cost. If a customer demands the item when is out of stock, the customer will generally go elsewhere. Penalty costs are estimated to be about $35 per unit. Replenishment lead time is three months. Assume 1 year = 52 weeks a) Transform demand in units per year. Find (QR) optimal values after 3 iterations (Qo. R₁. Q1. R₂. Q2, R3, Q3). b) Calculate total cost
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 home appliance department of a large department store is using a lot size reorder point
system to control the replacement of a particular unit. The store sells an average of 15 units each
week. Weekly demand follows a normal distribution with variance of 36 units per week. The store
pays $20 for each unit. Fixed cost is $35 per order. The accounting department recommends a
20% interest rate per year for the cost of capital for the holding cost. If a customer demands the
item when is out of stock, the customer will generally go elsewhere. Penalty costs are estimated
to be about $35 per unit. Replenishment lead time is three months. Assume 1 year = 52 weeks
a) Transform demand in units per year. Find (Q,R) optimal values
(Qo, R1, Q1, R2, Q2, R3, Q3).
b) Calculate total cost
after 3 iterations
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