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Rudiy27
3 years ago
12

The local Target store sells a variety of Dyson vacuum cleaners. A particularly popular model is the DC22, which costs Target $2

75 per unit. The annual holding cost per vacuum is 10% of this cost. Demand for the DC22 is relatively constant, but experiences some fluctuations from day to day. Average daily demand for the DC22 is normally distributed with an average of 5 units and a standard deviation of 2 units (and Target is open 365 days a year). When Target places an order of DC22s from its warehouse, the order arrives 3 days later. The fixed ordering cost is $10, regardless of how many DC22s are ordered. Target is willing to tolerate a 1% chance of stockout on any one order cycle. Target would like to use a continuous review inventory model. What is the reorder point (including safety stock)
Business
1 answer:
777dan777 [17]3 years ago
6 0

Answer:

24 units

Explanation:

safety stock = z-score 99% x √lead time x standard deviation of demand

safety stock = 2.576 x √3 x 2 = 8.92 units ≈ 9 units

reorder point = lead time demand + safety stock

lead time demand = 3 days x 5 = 15 units

reorder point = 15 + 9 = 24 units

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