Question

1) Lakeroad, a manufacturer of hard disks for personal computers, was founded in 2009 and has the following number of disks:

                  

Year	Numbers Sold
2009	150
2010	400

The company’s cost of manufacturing is $6 per disk and the selling price is $15 per disk. Each hard disk that remains in inventory by the end of a year will be sold on a different market at $5 per disk. The data for the two years exhibit a trend and the firm wants to use Holt’s method for forecasting future sales. It is estimated that the two smoothing constants are given by a ?=?=0.1 and that the initial values for level and trend are given by: Lo=-50 and To=200.

a) What is the forecast made at the end of 2010 for 2012?

Answer: F2,4=

b) What is the target customer service level?

CSL=

c) Assume the demand for 2012 follows a normal distribution, then based on the forecast, what is the mean ? and standard deviation ? of the demand? (Hint: ?=1.25*MAD)

                Answer: ?=          

                              ?=

d) Continued from part c, what is the optimal production quantity for 2012?

Answer: q*=

e) What is the target customer service level if there is an additional cost of $2 per disk in handling leftover inventory?

CSL=

f) What is the optimal safety stock for 2012 given that there is an additional cost of $2 per disk in handling leftover inventory?

SS=

g) What is the goodwill loss cost to guarantee a CSL=95% when the overage cost is the same as in e?

Answer 1