Answered: In this problem, your company is a…

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...

See similar textbooks

Related questions

Question

Consider again managing inventory for product 101, provided by Supplier A. Recall that
demand for 101 is approximately d = 200 units per week. You pay a purchase cost p = $500
per unit and value your inventory at r = $550 per unit. You estimate your inventory carry-
ing cost rate at r = 18% per year; storing one item of product 101 in your DC requires an
equivalent rent (storage cost) of s = $10 per unit per year.
Use truckload shipping for your orders of product 101; recall then that your total fixed
cost (k + F ) = $900 for any order of size no greater than Q = 700 units. You estimate a
total lead time (order processing plus transit time) of 12 days for these shipments.
To reduce your logistics costs, you decide that it might be worthwhile to backorder some
of the customer demand you face each cycle. When backordering, you will delay your out-
bound shipping of some of your customers’ orders.

1. To conduct analysis, you estimate a backordering cost per item b and initially propose
b = $3 per unit backordered per day as a loss-of-goodwill charge that will result from
your customers. Suppose you fill orders 7 days a week to your customers. On average,
how many days per week (fractional) will you backorder demand? If you instead wanted
to backorder demand one day out of every seven, what is the implied backordering cost
b′ per item per day?