Question

Moonbeam-Musel (MM), a manufacturer of small appliances, has a large injection molding department. Because MM's CEO, Crosscut Sal, is a stickler for keeping machinery running, the company stocks quick-change replacement modules for the two most common types of failure. Type A modules cost $150 each and have been used at a rate of about 7 per month, while type B modules cost $15 and have been used at a rate of about 30 per month, and for simplicity we assume a month is 30 days. Both modules are purchased from a supplier; replenishment lead times are one month and one-half month (15 days) for modules 1 and 2, respectively.
Required:
Suppose MM wishes to follow a base stock policy. Assuming that demand is Poisson-distributed, calculate the base stock levels for type A and type B modules in order to ensure a fill rate of at least 98 percent for each module. What is the expected total inventory level (in dollars)?

Answer 1

Answer: Because MM's CEO, Crosscut Sal, is a stickler for keeping machinery running, the company stocks quick-change replacement modules for the two most common ..

Explanation: