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Holl ROP - Soco the followi? hole year Stock-out Exercise When a stock-out occurs there are 4 common types of costs (depending on the length of time of the stock-out and the type of the product). According to the Financial Department, the cost for a short waiting of a customer is $10. When there are: backorder, lost sales, lost customer, the costs are: $50, $100, $500 respectively. Figures calculated by the Marketing Department for the last year show the following: 1. 20% of all stock-outs result in short waiting of a customer. 2. 50% of all stock-outs result in a back order. 3. 20% of all stock-outs result in a lost order. 4. 10% of all stock-outs result in lose of a customer. Questions: 1. What is the average cost of a stock-out? 2. How much should we invest in inventory to reduce the number of stock-outs from 1000 a year to only 100 per year? Holl ROP - Soco the followi? hole year Stock-out Exercise When a stock-out occurs there are 4 common types of costs (depending on the length of time of the stock-out and the type of the product). According to the Financial Department, the cost for a short waiting of a customer is $10. When there are: backorder, lost sales, lost customer, the costs are: $50, $100, $500 respectively. Figures calculated by the Marketing Department for the last year show the following: 1. 20% of all stock-outs result in short waiting of a customer. 2. 50% of all stock-outs result in a back order. 3. 20% of all stock-outs result in a lost order. 4. 10% of all stock-outs result in lose of a customer. Questions: 1. What is the average cost of a stock-out? 2. How much should we invest in inventory to reduce the number of stock-outs from 1000 a year to only 100 per year

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