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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?


Definitions:

Task Analysis

The process of breaking down a task into its components to study the task’s requirements and the skills needed to perform it.

Management Object

An element or goal that management aims to achieve through planning, organizing, leading, and controlling organizational resources.

Frederick Taylor

A pioneer of industrial engineering and management science, best known for his work on improving industrial efficiency through the principles of scientific management.

Maximum Prosperity

The highest level of economic well-being and wealth generation achievable by an individual, organization, or economy.

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