Question

Furnco sells secretarial chairs. Annual demand for secretarial chairs is normally distributed with a mean of 1040 chairs and a standard deviation of 50.99 chairs. Furnco orders its chairs from its flagship store. It costs $100 to place an order, and the lead time on each order is two weeks. Furnco estimates that each stock-out causes a loss of $50 in future goodwill. The annual cost of holding a chair in inventory is $18. a) If Furnco decides to implement an (r,Q) policy and decides to use Q = EOQ, what should be the policy parameters? b) What is the safety stock level in the policy you found in part (a)? c) What is the Type I service level attained in the policy you found in part (a)? d) Assume that Furnco wants to achieve a Type I service level of 99.5%. What should be the reorder point, r, and the corresponding optimal order quantity, Q (You can use formula (1))?

          Furnco sells secretarial chairs. Annual demand for secretarial chairs is normally distributed with a mean of 1040 chairs and a standard deviation of 50.99 chairs. Furnco orders its chairs from its flagship store. It costs $100 to place an order, and the lead time on each order is two weeks. Furnco estimates that each stock-out causes a loss of $50 in future goodwill. The annual cost of holding a chair in inventory is $18.

a) If Furnco decides to implement an (r,Q) policy and decides to use Q = EOQ, what should be the policy parameters?
b) What is the safety stock level in the policy you found in part (a)?
c) What is the Type I service level attained in the policy you found in part (a)?
d) Assume that Furnco wants to achieve a Type I service level of 99.5%. What should be the reorder point, r, and the corresponding optimal order quantity, Q (You can use formula (1))?

Added by Aurora D.

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