Determine the critical fractile of backorder cost

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Table 1 Period Monthly Demand January 250 February 478 March 900 April 405 May 500 June 859 July 560 August 350 September 700 October 900 November 200 December 100 The unit cost of an engine is $3,500 and there is a 20% interest rate associated with the holding cost. It takes 6 weeks for a replenishment order to be placed. Every time the facility has to setup to make these engines the manager estimates a setup cost of around $450,000. The annual cost of backorders is $12,000,000 and the manager is worried about this figure. Demand seems to be normally distributed and the manager would like to determine the following: Determine the critical fractile of backorder cost. Click on equation to get the formula to use What the z score of this critical fractile (Hint use the NORMSINV function in excel) What is the reorder point

 

Reference no: EM132257202

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