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zheka24 [161]
2 years ago
12

A manager reorders lubricant when the amount on hand reaches 422 pounds. Average daily usage is 45 pounds, which is normally dis

tributed with a standard deviation of three pounds per day. Lead time is nine days. What is the risk of a stockout?
Business
2 answers:
Neporo4naja [7]2 years ago
8 0

Answer:

2.94% (about 3%)

Explanation:

Average daily usage = 45 pounds

Lead time = 9 days

If we calculate the Reorder point using the above we get:

Reorder point = Lead time x Average daily usage = 45 x 9 = 405 pounds

However, the manager was reordering lubricant when the amount on hand reaches 422 pounds

Hence the safety stock = 422 - 405 = 17 units

Reorder point is calculated as: Lead time*demand per unit time=45*9=405

In the course of the lead time, we have a standard deviation calculated as:

Daily standard deviation x (Lead time)^0.5

= 3 x (9^0.5) = 3 x 3 = 9

Hence the risk of stock out = (422 - 405)/9 x Standard Deviation = 1.89 x S.D

Using the normal distribution curve, with the z-value of 1.89, this means that the probability of stock out = 0.0294 = 2.94%

Approximately 3%.

Snezhnost [94]2 years ago
7 0

Answer: The risk of stock out = 2.94%

Explanation:

Reorder point is calculated as: Lead time*demand per unit time=45*9=405

While the amount on-hand reaches 422 pounds, the manager was reordering lubricant.

During the lead time, Standard Deviation of Demand =Daily S.D*(Lead time)^0.5=3*(9^0.5)=9

Risk of Stock Out=(422-405)/9 S.D=1.89 S.D

From Normal distribution curve 1.89 S.D=0.0294=2.94%

Therefore, the risk of stock out=2.94%

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1 year ago
The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactu
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In Absorption Costing, All costs be it Fixed or Variable that are directly related to production are considered when computing the Cost of Production.

Under Variable Costs however, only variable Costs are considered for the computing of Cost of Production.

This difference in consideration of costs under each method leads to difference in income determination under each method.

Under Absorption Costing, fixed manufacturing costs are apportioned on produced units and the costs are only recovered when the units are sold but under variable costing, fixed manufacturing costs are treated as period costs and are therefore charged to the Income statement.

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