Organization’s Current Service Level Assignment
12. Assume an organization’s current service level on order fill is as follows:
Current order fill = 80%
Number of orders per year = 5,000
Percentage of unfilled orders back-ordered = 70%
Percentage of unfilled orders cancelled = 30%
Back order costs per order = $150
Lost pretax profit per cancelled order = $12,500
a. What is the lost cash flow to the seller at this 80 percent service level?
b. What would be the resulting increase in cash flow if the seller improved ord to 92 percent?
C. If the seller invested $2 million to produce this increased service level, wou investment be justified financially? Get Finance homework help today