Since the graduation period is coming you started a new business of selling Comm
ID: 382254 • Letter: S
Question
Since the graduation period is coming you started a new business of selling Commencement Brochures for the College of Engineering. Talking to the dean you estimate your demand to be normally distributed with a mean of -300 graduates and standard deviation of = 50 (after all not everyone buys your brochure). Each brochure costs you $10 to print and you sell them for $25. Moreover, brochures not sold are worthless after the commencement ceremony. Being a student you do not try to minimize your cost as the usual model suggests! All you want is to satisfy your captive market and provide a Service Level Type 1 of 70%. a) (15 points) How many brochures should you print? b) (15 points) When you order the number of brochures as found in part (a), what will be the resulting Service Level Type l1?Explanation / Answer
m mean 300 s Std Dev 50 Formula used C Cost 10 P Price 25 V Salvage 0 Cu Cost of under order 15 (P-C) Co Cost of over order 10 C-V CR Critical ratio 0.6 (Cu/(Cu+Co) Ideal service Level So actual order m+Z*s 312.6674 NORMINV(CR,m,s) 313 SL1 Service level 0.7 As to have SL1 order 326.22 NORMINV(SL1,m,s) 327 Ans A Value at 0.99 416.3174 0.99 SL2 1- Back order/expected demand for 70% SL1 0.815876 1-(max demand-expected demand)*10/(expected demand*15) Ans B