School of Industrial Engineering & Management (IEM) Inventory Management

International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

Homework 4
Problem 1: Monthly demand for Toy model at a Best Buy Store is normally distributed, with
a mean of 35 units and a standard deviation of 10 units. If backorder occurs, the store must
pay $65 for each toy model instead of $40. Assume that the carrying rate r = 35% per month.

Problem 2: An ophthalmologist’s office operates 52 weeks per year, 6 days a week. It

purchases disposable contact lenses for $11.70 per pair and sells for $50. Demand is 90 pairs
per week. Order cost is $54 per order. Annual interest rate is 27%. Lead-time is 3 weeks.
Standard deviation of weekly demand is 15 pairs. Given that 98% service-level. Clearly
identify different types of stocks: cycle, safety and pipeline.
a. Find a (Q, r) policy for this situation
b. Find average order frequency of the policy (a)
c. Find average service level (fill rate) of the policy (a)
d. Find average backorder level of the policy (a)
e. Find average inventory level of the policy (a)

Problem3: Assume weekly demand follows normal distribution N(100,32). Ordering cost is
$200 per order. Unit cost is $40 per computer and carrying rate is 0.1 $/$/week. Backordering
cost is $30. Lead time is 2 weeks.
Using iteratively method to find a (Q, r) policy for this case?
A = 200
c = 40
r = 0.1
p = 30
demand N(100,32)
Lead time = 2 weeks