(SOLVED) One of the largest selling items in J.C. Ward's Department Store is a new model of refrigerator that is highly energy-efficient.

Discipline: Finance

Type of Paper: Question-Answer

Academic Level: Undergrad. (yrs 1-2)

Paper Format: APA

Pages: 1 Words: 50

Question

One of the largest selling items in J.C. Ward's Department Store is a new model of refrig- erator that is highly energy-efficient. About 80 of these refrigerators are being sold per month. It takes about a week for the store to obtain more refrigerators from a wholesaler.

The demand during this time has a uniform distribution between 10 and 30. The administrative cost of placing each order is $100. For each refrigerator, the holding cost per month is $15 and the shortage cost per month is estimated to be $3.

The store's inventory manager has decided to use the stochastic continuous-review model, with a service level (measure 1) of 0.8, to determine an (R,Q) policy.

(a) Determine R and Q.

(b) What will be the average number of stockouts per year with this inventory policy?