Business, 15.04.2020 23:06 dontcareanyonemo

Cooper Company has average demand of 50 units per day. Lead time from the supplier averages 20 days. The combined standard deviation of demand during lead time is 20 units. The item costs $75 and inventory carrying cost is 24%. Answers to the next three questions are based on this information.1 standard deviation covers 84.13%1.04 standard deviations covers 85%1.28 standard deviations covers 90%1.65 standard deviations covers 95%1.96 standard deviations covers 97.5%2 standard deviations covers 97.72%2.33 standard deviations covers 99%3 standard deviations covers 99.86%6 standard deviations covers 99.99966%1. Suppose management decides it wants to offer a 95% service level. That is, Cooper Company is willing to experience a stock-out probability of 5% during the order cycle. How much safety stock should be carried?2. How much is the annual inventory carrying cost of the safety stock because of this decision?3. Suppose you tell management at Cooper Company (in the above two questions) it should raise safety stock to the six sigma level. If Cooper decides to do this, it will incur an additional inventory carrying cost of approximately how much?

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Cooper Company has average demand of 50 units per day. Lead time from the supplier averages 20 days....

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