Question

Suppose that in Problem 13 a Type 2 service objective of 95 percent is substituted for the stock-out cost of$ 12.80. Find the resulting values of Q and R. Also, what is the imputed cost of shortage for this case?

Answer 1

Answer:

(Q, R) = (1555, 1400)

shortage imputed = $0.388

Explanation:

Lot size-reorder point system is one of the multi period models. This system is denoted by decision variables (Q, R). This multi period model is implemented when there is uncertain demand in inventory control.

nevertheless, in the simple EOQ model, demand is known and fixed. But when the demand is random, these lot size-reorder point (Q, R) systems allow random demand.

There are two decision variables in a (Q, R) system:

Order quantity, Q and

Reorder point, R

Additional steps are attached as files