The annual demand for a product is 14,400 units. The weekly demand is 277 units with a standard deviation of 80 units. The cost to place an order is $28.00, and the time from ordering to receipt is eight weeks. The annual inventory carrying cost is $0.10 per unit. a. Find the reorder point necessary to provide a 95 percent service probability. (Use Excel's NORM.S.INV() function to find the z value. Round z value to 2 decimal places.)

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andromache andromache · Answer 1 · 2021-05-05T04:47:33+02:00

Answer:

2589.56 units

Explanation:

Given that

Annual Demand = 14400 units

Weekly Demand = 277 units

Standard Deviation = 80 units

Ordering cost = $ 28

Lead Time = 8 weeks

Carrying cost = $ 0.10 / unit

Based on the above information

a) For a 95 percent service level, the value of z by referring to the Normal Table in Appendix A) is 1.65

The reorder point is computed as follows:

= Weekly Demand × Lead Time + Z × Standard Deviation × √ Lead Time

=277 × 8 + 1.65 × 80 × √8

= 2216+ 373.56

= 2589.56 units