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epmeche05
epmeche05
27.04.2021 • 
Business

AA Manufacturing produces component X that is supplied to the assembly of Product A and Product B. Two units of X are needed for assembly of one unit of A and three units of X are needed for assembly of one unit of B. The weekly demand for Product A is normally distributed with a mean of 15 and standard dev of 4 and the weekly demand for product B is normally distributed with a mean of 10 and standard dev of 2. Assume that the demands for product A and B are independent. The lead time to produce Component X is 4 weeks. AA Manufacturing decides to use a (Q,R) Policy to manage the inventory of X. If on hand inventory is not enough to meet demand, the excess demand is backordered. AA’s service goal is to limit the demand met through backorders to at least 5% of the total demand. The fixed cost of ordering Component X is $800. The fixed cost of ordering Component X is $800. The holding cost of Component X is $5 per unit per week.

Required:
a. What are the mean and std dev of the weekly demand for Component X?
b. What are the mean and the std dev of the lead time demand for component X?
c. Determine the order quantity (Q) and the reorder level (R) for component X that will satisfy AA’s service level objective.
d. What is the probability that AA will un out of stock of X in a given week.

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