Calculate the expected cost per stockout with the following information: Probability of a back order is 67%, lost sale is 22%, and the probability of a lost customer is 11%. The cost per incident of a back order is $50, lost customer is $65,000. The sales price of the item is $12 with a 20% profit margin. The average order is 50.

Question

Business

Ryann Leonard

4 January, 11:28

Calculate the expected cost per stockout with the following information: Probability of a back order is 67%, lost sale is 22%, and the probability of a lost customer is 11%. The cost per incident of a back order is $50, lost customer is $65,000. The sales price of the item is $12 with a 20% profit margin. The average order is 50.

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Gunnar Webster · Answer 1

7208.9

Explanation:

Calculate the expected cost per stockout with the following information: Probability of a back order is 67%, lost sale is 22%, and the probability of a lost customer is 11%. The cost per incident of a back order is $50, lost customer is $65,000. The sales price of the item is $12 with a 20% profit margin. The average order is 50.

expected cost is the probability that a certain cost will be incurred multiplied by the cost.

Stockout cost can be defined as the lost income and expense in relation to a shortage of inventory.

Expected cost/stockout=Probability of stockout * expected demand

Probability of a back order is 67%

lost sale is 22%

probability of a lost customer is 11%.

expected demand for back order $50

The average order is 50.

lost customer is $65,000

The sales price of the item is $12 with a 20% profit margin

.67*50+.11*65000+.22*50+1.2*12

33.5+7150+11+14.4

=7208.9