Question

A drugstore uses fixed-order cycles for many of the items it stocks. The manager wants a service level of .95. The order interval is 14 days, and lead time is 2 days. Average demand for one item is 65 units per day, and the standard deviation of demand is 3 units per day. Given the on-hand inventory at the reorder time for each order cycle shown in the following table.

Cycle	On Hand
1	40
2	12
3	95

Determine the order quantities for cycles 1, 2, and 3: (Round your answers to the nearest whole number)

Answer 1

daily demand=65units

order inverval= 14days

lead time = 2 days

standard deviation==3

service level=0.95

z=1.96

OT+LT=14+2=16

Order Quantity = D*(OI+LT)+Z*Std. Dev*(OI+LT)^0.5-On hand inventory

Cycle 1

order quantity=65*(14+2)+1.96*3 √16 -40 =1040+23.52-40

order quantity =1023.52=1024

Cycle 2

order quantity=65*(14+2)+1.96*3 √16 -12 =1040+23.52-12

order quantity =1051.52=1052

Cycle 3

order quantity=65*(14+2)+1.96*3 √16 -95 =1040+23.52-95

order quantity =968.52 =969