(a) Calculate the order quantity and reorder point. (b) Determine the annual holding and ordering costs respectively.

Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter16: Lean Supply Chain Management
Section: Chapter Questions
Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...
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Sam's Job Shop buys one part- Tegdiws for use in its production system. Th
parts are needed throughout the entire 365-day year. Tegdiws are used at
relatively constant rate and are ordered whenever the remaining quantity
drops to the reorder level. Data for the product is as follows:
Annual demand: 10,000
Holding cost (% of item cost): 20%
Setup or order cost: $150.00
Lead time: 28 days
Item Cost: $10.00
Standard deviation of daily demand: 10
Service Level: 99%
(a) Calculate the order quantity and reorder point.
(b) Determine the annual holding and ordering costs respectively.
Transcribed Image Text:Sam's Job Shop buys one part- Tegdiws for use in its production system. Th parts are needed throughout the entire 365-day year. Tegdiws are used at relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. Data for the product is as follows: Annual demand: 10,000 Holding cost (% of item cost): 20% Setup or order cost: $150.00 Lead time: 28 days Item Cost: $10.00 Standard deviation of daily demand: 10 Service Level: 99% (a) Calculate the order quantity and reorder point. (b) Determine the annual holding and ordering costs respectively.
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