Ray wishes to determine the optimal order quantity for its best- selling bike in his bike store. Ray pays the supplier a wholesale price of $87 each for this bike. Ray has estimated the average daily demand for this bike is 31 units. The store opens 254 days a year. The cost to carry one bike in the store for a whole year is 7% of the unit bike cost. Ray has estimated that, on average, the order processing cost, i.e., ordering cost, with the bike supplier each time is $114, and it roughly takes 20 working days to receive the order from the supplier. Ray wishes to avoid the stock-out situation with a probability of 95%, and this requires Ray to carry a safety stock of 30 bikes in the store. What is the optimal order quantity (EOQ value) that Ray should order each time from the bike supplier to minimize his long-run inventory cost?

Ray wishes to determine the optimal order quantity for its best- selling bike in his bike store. Ray pays the supplier a wholesale price of $87 each for this bike. Ray has estimated the average daily demand for this bike is 31 units. The store opens 254 days a year. The cost to carry one bike in the store for a whole year is 7% of the unit bike cost. Ray has estimated that, on average, the order processing cost, i.e., ordering cost, with the bike supplier each time is $114, and it roughly takes 20 working days to receive the order from the supplier. Ray wishes to avoid the stock-out situation with a probability of 95%, and this requires Ray to carry a safety stock of 30 bikes in the store. What is the optimal order quantity (EOQ value) that Ray should order each time from the bike supplier to minimize his long-run inventory cost?

Intermediate Algebra

19th Edition

ISBN:9780998625720

Author:Lynn Marecek

Publisher:Lynn Marecek

Chapter12: Sequences, Series And Binomial Theorem

Section12.3: Geometric Sequences And Series

Problem 12.57TI: What is the total effect on the economy of a government tax rebate of $1,000 to each household in...

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