ORIE 3120

ICE
March 14, 2017

1. Weekly demand for a Jumbo Jenga game has historically been normally distributed
with mean 34 and variance 100. The lead time is two weeks. Each unit costs the
distribution center $60, and it costs $150 to place an order. The selling price of the
game is $94.99. The inventory holding cost on an annual basis is found using an
interest rate of 30%. The weight of each game is 206 Newtons.
What is the expected order-up-to level, expected annual holding cost, and expected
annual ordering if they were to apply a
a. Type I service level policy, periodic review every four weeks, with = 98.5%?
b. How many would they order if they found that there were 20 in stock?
c. Type II service level policy, periodic review every four weeks, with = 98.5%?
d. How many would they order if they found there were 20 in stock?