Answered: a. Using this data, compute the…

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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Question

The demand for a clothing brand is shown in the table below. The cost per order is about $4000. Cost of each unit of clothing = $5. Carrying cost percentage = 25% per item per 5 months. The analysis period = 5 month duration.

Month	Demand
1	400
2	300
3	200
4	400
5	500

a. Using this data, compute the solutions using the Lot for Lot and Periodic Order Quantity heuristics? Which of these heuristics would perform better and why?

b. Assuming that the demand follows a normal distribution with the mean and variance from the data given above, determine the optimal order should be greater or lesser than the single period EOQ model.

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

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