Kabel Market store sells electric cable. The demand for cable is normally distributed. The inventory related information at Kabel Market is as follows:   Average Annual Demand = 16,900 meters Standard deviation of weekly demand = 28 meters Cable selling price = AMD 640.00 per meter   Ordering cost = AMD 1,250.00 per order Lead time = 5 weeks Annual inventory-holding cost estimate = 2.5% of the cable selling price Required service level = 95% Kabel Market works 52 weeks a year.    Note: The approximate z values are: for 0.9 ≈ 1.28, for 0.92 ≈ 1.405, for 0.95 ≈ 1.645, for 0.98 ≈ 2.05.      Suppose the bar management practices the fixed-QUANTITY ordering system with the use of the economic order quantity. Answer the following questions: (i)  How many meters of cable they order from the supplier each time? (ii)  When do they place an order? (iii)  What is the safety stock?

Practical Management Science
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ISBN:9781337406659
Author:WINSTON, Wayne L.
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Kabel Market store sells electric cable. The demand for cable is normally distributed. The inventory related information at Kabel Market is as follows:

 

  • Average Annual Demand = 16,900 meters
  • Standard deviation of weekly demand = 28 meters
  • Cable selling price = AMD 640.00 per meter  
  • Ordering cost = AMD 1,250.00 per order
  • Lead time = 5 weeks
  • Annual inventory-holding cost estimate = 2.5% of the cable selling price
  • Required service level = 95%
  • Kabel Market works 52 weeks a year.

 

 Note: The approximate z values are: for 0.9 ≈ 1.28, for 0.92 ≈ 1.405, for 0.95 ≈ 1.645, for 0.98 ≈ 2.05. 

 

 

Suppose the bar management practices the fixed-QUANTITY ordering system with the use of the economic order quantity. Answer the following questions:

(i)  How many meters of cable they order from the supplier each time?

(ii)  When do they place an order?

(iii)  What is the safety stock?

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