Reference no: EM131133827

The Texas Longhorns won the Super Bowl last year. As a result, sportswear such as hats, sweatshirts, sweatpants, and jackets with the Longhorns’ logo are popular. The Longhorns operate an apparel store outside the football stadium. It is near a busy highway, so the store has heavy customer traffic throughout the year, not just on game days. In addition, the stadium has high school or college football and soccer games almost every week in the fall, and baseball games in the spring and summer. The most popular single item the stadium store sells is a black and orange baseball-style cap with the Longhorns’ logo on it and costs the store $2.95 per unit. The annual holding cost rate is 20 percent. Using an EOQ model, they determined that an order quantity of 300 units should be used. The lead time to receive an order is one week, and the demand is normally distributed with a mean of 150 units per week and a standard deviation of 40 units per week. a. What is the reorder point if the stock is willing to tolerate a 1-percent chance of a stockout during an order cycle? b. What safety stock and annual safety stock cost are associated with your recommendation in part a ? c. The Longhorn store is considering making a transition to a periodic-review system in an attempt to coordinate ordering of some of its products. The review period would be two weeks and the delivery lead time would remain one week. What target inventory level would be needed to ensure the same 1-percent risk of stockout? d. What is the safety stock associated with your answer to part c ? e. What is the annual cost associated with holding this safety stock? Ch*safety stock f. Compare your answers to parts b and d. If you were the manager of the store, would you choose a continuous- or periodic-review system?