Homework Answers
a.
Annual Days = 350 days
Daily average demand = d = 17 rolls
Standard deviation of daily demand = σd =4 rolls per day
Lead time = L = 4 days
Cost of ordering = S = $1.00
Cost of holding = H = $0.44 per roll per year
Annual demand = days per year x daily demand = 350 x 17 = 5950 rolls
EOQ =√(2*D*S/H) = √(2*5950*1/0.44) = 164.46 rolls per order
b.
Reorder Level = Demand during lead time + Safety stock
Safety Stock = z√(Lσd2)
For the Cycle service level of 96%, z-score is 1.751
Safety Stock = 1.751√(4*42) = 7 rolls
Reorder Level = dL + SS = (17)(4) + 7
Reorder Level = 75 rolls
Reorder Level = 75 rolls
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