Inventory system that minimizes inventory cost

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Reference no: EM132257284

Gentle Ben's Bar and Restaurant uses 6,100 quart bottles of an imported wine each year. The effervescent wine costs $7 per bottle and is served only in whole bottles because it loses its bubbles quickly. Ben figures that it costs $5 each time an order is placed, and holding costs are 35 percent of the purchase price. It takes six weeks for an order to arrive. Weekly demand is 122 bottles (closed two weeks per year) with a standard deviation of 35 bottles.

Ben would like to use an inventory system that minimizes inventory cost and will provide a 90 percent service probability.

a. What is the economic quantity for Ben to order? (Round your answer to the nearest whole number.)

b. At what inventory level should he place an order? (Use Excel's NORMSINV() function to find the correct critical value for the given α-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.)

Reference no: EM132257284

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