The Purchasing Manager for a Firm Is Trying to Determine

question 24

Essay

The purchasing manager for a firm is trying to determine what the safety stock should be for a particular product. She has developed the following table, which gives the distribution of demand during the lead-time and the probabilities: The carrying cost is $5 per unit per year, the ordering cost is $30 per order, and the stockout cost is $40 per unit. The reorder point is 60 units, and 6 orders are placed each year. What level of safety stock should be maintained?

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Definitions:

Context-Dependent Memory

The theory that information learned in a particular situation or environment is better remembered when in that same environment.

Maintenance Rehearsal

A cognitive process that involves repeatedly verbalizing or thinking about a piece of information to keep it in short-term memory.

Mentally Repeating

The process of internally echoing or recalling information to aid in memory retention.

Electronic Storage Device

A device used to store electronic data, such as a hard drive, solid-state drive, or USB flash drive.