(a): Economic order quantity = 408 bottles
Calculations: EOQ = [2*D*S/H]^0.5
= [(2*5000*10/(0.2*3)]^0.5
= 408.25. This will be rounded to nearest whole number i.e. 408
(b): Inventory level = 385 bottles
Calculations:
Using the NORM.S.INV function in excel we get z = 1.64
Thus R = 100*3 + 1.64*(3^0.5)*30
= 300 + 85.22
= 385 bottles
Problem 11-23 (Static) Gentle Ben's Bar and Restaurant uses 5,000 quart bottles of an imported wine each year. The...
Gentle Ben's Bar and Restaurant uses 5,000 quart bottles of an imported wine each year. The effervescent wine costs $3 per bottle and is served only in whole bottles because it loses its bubbles quickly. Ben figures that it costs $10 each time an order is placed, and holding costs are 20 percent of the purchase price. It takes three weeks for an order to arrive. Weekly demand is 100 bottles (closed two weeks per year) with a standard deviation...
Problem 11-15 (Algo) Given the following information, formulate an inventory management system. The item is demanded 50 weeks a year. PARAMETER VALUE PARAMETER VALUE Item cost $ 11.00 Standard deviation of weekly demand 30 per week Order cost $ 277.00 Lead time 1 week Annual holding cost 32 % of item cost Service probability 90 % Annual demand 26,900 Average weekly demand 538 per week a. Determine the order quantity and reorder point. (Use Excel's NORM.S.INV() function to find the...