00:01
Daily demand for packages of five videotapes at a warehouse store is found to be normally distributed with the mean of 50 and standard deviation five.
00:11
When the store orders more tapes, the ordering costs is $42 and the orders take four days to arrive.
00:18
Each pack of tapes costs $7 .20 and there is 24 % annual holding costs for inventory.
00:27
Assume the store is open 360 days a year.
00:30
What is the eoq? if the store wants the probability of stocking out to be no more than 5 % and the demand each day is independent of the day before, what reorder point should be set.
00:44
And how much of your reorder point in part b is safety stock? so our daily demand, which we're going to call little d, is 50 packs.
00:52
Some of this information we're given and some of it we're going to have to calculate.
00:56
We were given the 50 packs.
00:58
The number of days per year that they're open, we were given this as well.
01:06
Is 360 days.
01:14
This annual demand, and we're going to call this big d, is the demand per day times the number of days they're open.
01:28
That gives me 50 times 360 days if they're open for a total of 18 ,000 packs per year.
01:39
The standard deviation, which is omega, is five packs.
01:43
The lead time which we're going to call capital l is four days this is information we're given the ordering cost which we're going to call capital l is $42 we're given that as well and our cost per pack is $7 .20 the annual holding cost which we're going to call capital h is 24 % because that's the percentage we're told in the problem itself times the $7 .20.
02:35
20 % times 720 gives us 0 .24 when we convert the percentage to a decimal times 7 .20, which gives us an annual holding cost of 1 .728.
02:55
The economic order quantity, or the eoq, is the square root of two times the annual demand times the ordering cost divided by, the annual holding cost.
03:24
That gives me the square root of two times 18 ,000 times 42 divided by 1 .728.
03:36
This gives me the square root.
03:38
I'm going to do the top first...