(Solution) - Floyd Distributors Inc provides a variety of auto parts to -(2025 Original AI-Free Solution)

Discipline:

Type of Paper:

Academic Level: Undergrad. (yrs 3-4)

Paper Format: APA

Pages: 5 Words: 1375

Download Solution ($11.00) Write My Paper Afresh

Buy For $11.00

Paper Details

Floyd Distributors, Inc., provides a variety of auto parts to small local garages. Floyd purchases parts from manufacturers according to the EOQ model and then ships the parts from a regional warehouse direct to its customers. For a particular type of muffler, Floyd?s EOQ analysis recommends orders with Q* = 25 to satisfy an annual demand of 200 mufflers. Floyd?s has 250 working days per year, and the lead time averages 15 days.
a. What is the reorder point if Floyd assumes a constant demand rate?
b. Suppose that an analysis of Floyd?s muffler demand shows that the lead-time demand follows a normal probability distribution with µ = 12 and ? = 2.5. If Floyd?s management can tolerate one stock-out per year, what is the revised reorder point?
c. What is the safety stock for part (b)? If Ch = $5/unit/year, what is the extra cost due to the uncertainty of demand?