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Anvils Works’ requires, on average, 2800 tons of aluminum each week, with a standard deviation of 1000 tons. The lead time to receive its orders is 10 weeks. The holding cost for one ton of aluminum for one week is $11. It operates with a 0.98 in-stock probability. a. On average, how many tons does it have on order?

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Answer: 28,000 tons

Explanation:

Given the following ;

Average Weekly need = 2,800 tons

Lead time = 10 weeks

Average amount of tons on order = 10 × 2800 = 28,000 tons.

The on order quantity may be explained as a purchase order indicating the status of ordered goods or items. These purchase order status is in effect once items goods ordered have been been perfected and in-transit. The purchase order status remains valid until the goods are received.

The lead time refers to the time range or period between the initiation and receipt or completion stage of an order.

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