A Company Recently Lowered Its Service Performance from 99% Product

question 10

Multiple Choice

A company recently lowered its service performance from 99% product availability to 97% product availability. The change saved the company exactly $1million per year in inventory carrying cost.Senior management now wants to lower the service level to 95% from 97%. Such a further change is likely to save:

• A)less than $1 million
• B)about another $1 million
• C)more than $1 million
• RajDee Furniture Company (RFC) buys and sells office furniture. The company buys chairs from a manufacturer for $40 per unit. Order costs are $200 per order and there is a lead time of 10 days for each order to arrive from the manufacturer to RFC warehouse. Inventory carrying cost for RFC is 10%. Average yearly demand for the chairs is 40,000 units. Answer the following questions, assuming there is no uncertainty at all about the demand or the lead time.

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Definitions:

Estrogen

A group of steroid hormones which play a critical role in sexual and reproductive development, primarily in women, but also has important functions in men.

Hypothalamus

A region of the brain responsible for producing hormones that regulate body temperature, hunger, moods, release of hormones from many glands, especially the pituitary.

Cerebral Cortex

The outer layer of the cerebrum in the brain, involved in many complex brain functions including memory, attention, perception, cognition, awareness, thought, language, and consciousness.

Estrus

In mammals, the period in the cycle when the female is sexually receptive (in heat).