Question -
LatinOrg Inc. sells an organic product made in Costa Rica. Because the time it takes to receive and order the products0, LatinOrg places an order every two weeks. The number of products ordered is the difference between the actual on-hand inventory at the end of the week that the order is made and 100, the maximum allowed amount. It cost $50 to place and received an order, $4 each product, and $1/week to keep the product in the store. The product sells for $12. The historical information of on-hand inventory at the time an order is made is as showed.
|
On-hand inventory
|
Probability
|
|
15
|
.12
|
|
25
|
.25
|
|
35
|
.35
|
|
40
|
.20
|
|
42
|
.06
|
|
55
|
.02
|
a) Simulating 60 weeks, what is the estimated average order size (show your data or calculations)?
b) Based on the simulation, what is the average total cost of "having" the product?