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(Solution Library) An airline company uses a fixed order size with safety stock system to control inventory of a fast-moving item. The inventory position of


Question: An airline company uses a fixed order size with safety stock system to control inventory of a fast-moving item. The inventory position of the item is tracked continually. Relevant information about the item follows:

Expected annual demand
Average monthly demand
Ordering cost
Annual holding cost as a
fraction of unit value
Unit purchase price
Lead time
Standard deviation of
monthly demand 		=
=
=

=
=
=

= 		1920 units per year
1920/12 = 160 units per month
$25 per order

36 percent
$20 per unit
3 months

30 units

The manager specifies the probability of no stockout in an inventory cycle to be 96 percent. Demand per month is normally distributed.

  1. Suppose Q = EOQ. Determine EOQ and R , the reorder point. Assume that demand in any given month is normally distributed and is independent of demand in other months.
  2. What is the safety stock for this item?

Price: $2.99
Solution: The downloadable solution consists of 2 pages
Deliverable: Word Document


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