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24 December, 22:33

Uncle Chuck's Chicken Sandwich operates 360 days per year and uses a periodic system to make inventory decisions for fries. Daily demand has been forecast to be 500 units and the standard deviation of daily demand is 100 units. The order interval is 10 days and the order lead time is 9 days. Uncle Chuck's Chicken Sandwich desires to maintain a service level of 98% for this item. If the on-hand inventory is 2,800, what is the order quantity? Round your answer to a whole number.

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  1. 24 December, 22:50
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    7,953.57 units

    Explanation:

    Given that

    Total number of days in a year = 360 days

    Daily demand = 500 units

    Standard deviation of daily demand = 100 units

    Interval of order = 10 days

    Lead time = 9 days

    Service level = 98% its z value = 2.05

    On hand inventory = 2,800

    Based on the above information, the order quantity is

    = Daily demand * (interval of order + lead time) + {z value * sqrt (Interval of order + lead time) * standard deviation units} - on hand inventory

    = 500 units * (10 days + 9 days) + {2.05 * √19 * 100 units} - 2,800 units

    = 9,500 units + 893.57 units - 2,800 units

    = 7,953.57 units

    We simply applied the above formula
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