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Gentle Ben's Bar and Restaurant uses 5,900 quart bottles of an imported wine each year. The effervescent wine costs $3 per bottle and is served only in whole bottles because it loses its bubbles quickly. Ben figures that it costs $5 each time an order is placed, and holding costs are 30 percent of the purchase price. It takes four weeks for an order to arrive. Weekly demand is 118 bottles (closed two weeks per year) with a standard deviation of 45 bottles. Ben would like to use an inventory system that minimizes inventory cost and will provide a 98 percent service probability.

a. What is the economic quantity for Ben to order? (Round your answer to the nearest whole number.)

b. At what inventory level should he place an order? (Round your answer to the nearest whole number.)

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91890129

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