operation management

| December 3, 2015

Ray wishes to determine the best order size for its best-selling product. Ray has estimated the annual demand for this product is 1,000 units. His cost to carry one unit is $100 per year per unit, and he has estimated that each order costs $25 to place.

(1) Using the EOQ model, how many should Ray order each time?

Assume 250 work-day per year. If the lead-time is 20 days and daily standard deviation is 2, and Ray wish to provide a 90% service level,

(2) What level of safety stock Ray needs to keep?

(3) What is the reorder point?

(4) If Ray wishes to increase the service level to 95%, then what is the new level of safety stock?

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