An automotive warehouse stocks a variety of parts that are sold at neighborhood stores. One particular part, a popular brand of oil filter, is purchased by the warehouse for $1.50 each. It is estimated that the cost of order processing and receipt is $100 per order. The company uses an inventory carrying charge based on a 25 percent annual interest rate. The monthly demand for the filter follows a normal distribution with mean 300 and standard deviation 80. Order lead time is assumed to be five months. Assume that if a filter is demanded when the warehouse is out of stock, then the demand is back-ordered, and the cost assessed for each back- ordered demand is $12.80.
An automotive warehouse stocks a variety of parts that are sold at neighborhood stores. One particular part, a popular brand of oil filter, is purchased by the warehouse for $1.50 each. It is estimated that the cost of order processing and receipt is $100 per order. The company uses an inventory carrying charge based on a 25 percent annual interest rate. The monthly demand for the filter follows a normal distribution with mean 300 and standard deviation 80. Order lead time is assumed to be five months. Assume that if a filter is demanded when the warehouse is out of stock, then the demand is back-ordered, and the cost assessed for each back- ordered demand is $12.80.
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:An automotive warehouse stocks a variety of parts that are sold at
neighborhood stores. One particular part, a popular brand of oil
filter, is purchased by the warehouse for $1.50 each. It is estimated
that the cost of order processing and receipt is $100 per order. The
company uses an inventory carrying charge based on a 25 percent
annual interest rate. The monthly demand for the filter follows a
normal distribution with mean 300 and standard deviation 80.
Order lead time is assumed to be five months. Assume that if a
filter is demanded when the warehouse is out of stock, then the
demand is back-ordered, and the cost assessed for each back-
ordered demand is $12.80.
Determine the optimal values of the order quantity and the reorder
level.
Q=
R=
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