The Winfield Distributing Company has maintained an 80% service level policy for inventory of string trimmers. Mean demand during the reorder period is 200 trimmers, and the standard deviation is 65 trimmers. The annual cost of carrying one trimmer in inventory is $6. The area salespeople have recently told Winfield's management that they could expect a $300 improvement in profit (based on current figures of cost per trimmer) if the service level were increased to 95%. Is it worthwhile for Winfield to make this change?
The Winfield Distributing Company has maintained an 80% service level policy for inventory of string trimmers. Mean demand during the reorder period is 200 trimmers, and the standard deviation is 65 trimmers. The annual cost of carrying one trimmer in inventory is $6. The area salespeople have recently told Winfield's management that they could expect a $300 improvement in profit (based on current figures of cost per trimmer) if the service level were increased to 95%. Is it worthwhile for Winfield to make this change?
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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Transcribed Image Text:The Winfield Distributing Company has maintained an 80% service level policy for inventory of
string trimmers. Mean demand during the reorder period is 200 trimmers, and the standard
deviation is 65 trimmers. The annual cost of carrying one trimmer in inventory is $6. The area
salespeople have recently told Winfield's management that they could expect a $300
improvement in profit (based on current figures of cost per trimmer) if the service level were
increased to 95%. Is it worthwhile for Winfield to make this change?
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