2. The annual mean demand for a certain kitchen-table at Smart Home (SH) is 9,000 units. Ordering cost per order is $50,

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2 The Annual Mean Demand For A Certain Kitchen Table At Smart Home Sh Is 9 000 Units Ordering Cost Per Order Is 50 1 (61.3 KiB) Viewed 49 times

2. The annual mean demand for a certain kitchen-table at Smart Home (SH) is 9,000 units. Ordering cost per order is $50, holding rate is 22%, and unit cost is $500. To apply the EOQ model with service level, demand records were collected daily. The daily demand is normally distributed, with a mean of 25 units and a standard deviation of 15 units. Lead time = 3 days 2.1 If the cycle service level required is 92%, what is the reorder point for a lead time of 3 days? a. The reorder point for the daily demand is 46.07. So, the reorder point for the 3-day lead time =3*46.07 b. In 8% of the cycle time we shall not have enough inventory to meet daily demand. Thus, the reorder point is 0.08*E0Q*3 = 0.08*90.45*3 = 21.708 c. 111.50 d. 138.22 2.2 If SH limits the amount spent on holding safety stock to (not more than 50% of the annual variable cost, what service level can be achieved? The lead time is still 3 days. a. 50% of the annual variable cost = 50%*9949.87=4974.93 dollars. With this $ amount we can purchase 9 tables. This increases the inventory per cycle to EOQ+55 = 90.45+9=99.45. So, the cycle service level is 90.45/99.45 = 90.09% b. 50% of the TV(Q*) = $4974.93. With this $ amount we can hold 45 tables as safety stock. This results in service level just below 96%. c. None of the above. 2.3 SH received an offer from another supplier to purchase the tables for $498 a unit, but with a lead time of 60 days. Should this supplier be preferred over the current supplier (who sells the tables for $500 a unit and requires only 3 days lead time), if the 92% service level needs to be maintained? Base your answer merely on the total cost. In the Answers sheet answer Yes/No, and show the requested quantities.