Answer:
1755 units are ordered
Explanation:
given data
Daily demand = 100 units
standard deviation = 25 units
review period = 10 days
lead time = 6 days
stock = 50 units
service probability = 98 percent
to find out
how many units should be ordered
solution
order quantity is calculated in fix time period formula is express as
q = [tex]\bar{d}(L+R) + z \sigma_{L+R} - I[/tex] .........................a
here L is lead time and R is review time and σ is standard deviation and I is stock and d is Daily demand
so first we find here standard deviation that is
[tex]\sigma_{L+R} = \sqrt{L} * \sigma[/tex] ...................1
[tex]\sigma_{L+R} = \sqrt{25} * 25[/tex]
[tex]\sigma_{L+R} =100[/tex]
so the value of z is for 98 % service probability is 2.05
so put here value in equation 1
q = 100 × ( 6 +10) +(2.05) × 100 - 50
q = 1755 units
so 1755 units are ordered
