A vaccine marketed by a drug company has a known and constant demand of 1,200 units per year (or 100 units per month). The production cost is $720 per unit, the fixed setup cost is $2,400 per batch of production, and the holding cost per unit per year is $144. Lead-time for production is half a month. What is the optimal quantity per batch to produce? Choose the closest number if needed. 350 186 240 825 200
Now assume that the company's demand averages 100 units per month but is no longer constant. The monthly demand is normally distributed with mean 100. The company has been using a reorder point that provides a service level of 90%. Suppose management wants to provide a better service level and is thinking of doubling the amount of safety stock. What would be the service level if the safety stock is doubled? 98.1% 99.5% 92.8% 99.9% 95.5%
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!