The New Office Supply Discounter, Paper Clips, Etc

question 47

Essay

The new office supply discounter, Paper Clips, Etc. (PCE), sells a certain type of ergonomically correct office chair which costs $300. The annual holding cost rate is 40%, annual demand is 900, and the order cost is $20 per order. The lead time is 4 days. Because demand is variable (standard deviation of daily demand is 2.4 chairs), PCE has decided to establish a customer service level of 90%. The store is open 300 days per year.
a. What is the optimal order quantity?
b. What is the safety stock?
c. What is the reorder point?

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Definitions:

Extrinsic Rewards

Benefits or compensation provided by external factors, such as money, grades, or recognition, to motivate behavior.

Monetary Rewards

Financial incentives given to employees in recognition of their work performance, contribution, or achievements.

Nonmonetary Rewards

Nonmonetary rewards consist of benefits provided to employees that do not involve financial compensation, such as recognition or career development opportunities.

Shareholders

Individuals or entities that own shares in a corporation and have an interest in its performance and governance.