Maynard Shoe Co. produces and sells an excellent-quality walking shoe. After production, the shoes are...
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Maynard Shoe Co. produces and sells an excellent-quality walking shoe. After production, the shoes are distributed to 20 warehouses around the country. Each warehouse services approximately 100 stores in its region. Maynard uses an EOQ model to determine the number of pairs of shoes to order for each warehouse from the factory. Annual demand for warehouse OR2 is approximately 132,000 pairs of shoes. The ordering cost is $264 per order. The annual carrying cost of a pair of shoes is $2.50 per pair.
3. Although OR2s average weekly demand is 2,750 pairs of shoes (132,00012months4weeks),(132,00012 months4 weeks), demand each week may vary with the following probability distribution:
Total demand for 1 week 2,000 pairs 1,950 pairs 2,750 pairs 2,970 pairs 3,260 pairs
Probability (sums to 1.00) 0.02 0.10 0.76 0.10 0.02 845
If a store wants shoes and OR2 has none in stock, OR2 can rush them to the store at an additional cost of $4 per pair. How much safety stock should warehouse OR2 hold? How will this affect the reorder point and reorder quantity?
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