A manufacturer of lawn care equipment has introduced a new product. The anticipated demand is normally distributed with a mean of ? = 100 and a standard deviation of ? = 50
Each unit costs $75 to manufacture and the introductory price is to be $125 to achieve this level of sales. Any unsold units at the end of the season are unlikely to be very valuable and will be disposed of in a fire sale for $25 each. It costs $10 to hold a unit in inventory for the entire season. What is the cost of overstocking? What is the cost of understocking? What is the optimal cycle service level? How many units should be manufactured for sale?
What will be an ideal response?
Answer:
Co = c - s
= $75 - $15
= $60
Cu = p - c
= $125 - $75
= $50
CSL* = Cu/(Cu + Co)
= 50/(50 + 60)
= .4545 ≈ .45
O* = NORMINV(CSL*, μ, σ)
= NORMINV(0.45, 100, 50)
= 93.71693 ≈ 94
You might also like to view...
Discuss the key features of cloud computing
There are multiple leader behaviors, task characteristics, and follower characteristics in path-goal theory that must be assessed correctly and integrated for effective leadership. This is a ______.
A. strength of path-goal theory B. criticism of path-goal theory C. leader benefit of path-goal theory D. organizational benefit of path-goal theory
Interpretative rules are exempt from the APA's procedural requirements of notice and comment
a. True b. False Indicate whether the statement is true or false
Which of the following constitutes an implied warranty?
A. affirmation of the facts of the goods B. description of the goods C. model or sample of the goods D. adequate packaging and labeling of the goods