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What is the excess cost per unit

Assignment Help Operation Management
Reference no: EM132817345

Topic: Inventory Management

1: A sausage factory can produce wieners at a rate of 500 kg per day. It supplies wieners to local stores and restaurants at a steady rate of 100 kg per day. The cost to prepare the equipment for producing European wieners is $12. Annual holding cost is $4/kg of wieners. The factory operates 300 days a year.

(a) What is the optimal production run quantity (EPQ)? [Keep 2 decimal places.]

(b) What is the length (in days) of a production run? [Keep 2 decimal places.]

2: A fish store buys fresh tuna daily for $4.20/kg and sells it for $5.70/kg. At the end of each day, any remaining tuna is sold to a producer of cat food for $2.40/kg. Daily demand for tuna at the fish store can be approximated by a Normal distribution with a mean of 80 kg and a standard deviation of 10 kg.

(a) What is the Excess cost (Ce) per unit? [Keep 2 decimal places.]

(b) What is the Shortage cost (Cs) per unit? [Keep 2 decimal places.]

(c)What is the optimum service level? [Keep 4 decimal places]

(d) What is the optimum stocking quantity? [Note that the z score will be a negative value, and hence the optimum stocking quantity will be less than the expected demand. [Keep 2 decimal places.]

Reference no: EM132817345

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