Question 3
The weekly demand for a product, which is held in stock is always 90 units.
When an order for new stock is placed, it is delivered almost instantaneously by an ordering cost of 50,000 is incurred. The product costs 3,000 per unit,
and it costs 15 percent of this amount to hold a unit in stock for a year.
Currently, orders are placed for 2000 units. There are 50 working weeks in a
year and lead time is one week.
a) As a management science student, the MD of the company seeks your
expert advice on ways in which to determine the economic order quantity,
optimal order cycle time, re-order level and total annual inventory cost.
Advise the MD, providing detailed explanation using your answer. Write
your answer in a form of a report to the MD.
b) Advise the MD about savings, if any, could be made by changing from
current order quantity of GH¢ 2000 units to the one obtained in (a) above.
c) Describe the order policy followed by the firm based on your calculations
Trending nowThis is a popular solution!
Step by stepSolved in 4 steps
- 03) Halifax Souvenir Company currently orders 500 units four times each year. Each order costs $12 and each unit costs $1.20 per year to carry. On average, it takes 5 days to receive an order from the supplier. The company operates 250 days per year. Required: 1. What is the EOQ? 2. Calculate total annual inventory cost under EOQ. 3. What is the current inventory cost? 4. What is the re-order point?arrow_forwardJosie Gall's firm has developed the supply, demand, cost, and inventory data that follow. Supply Available Period 1 2 3 Regular Time 40 35 40 Overtime 15 15 15 Subcontract 10 10 10 Demand Forecast 30 units $100 $150 $200 $6 50 65 55 Initial inventory Regular-time cost per unit Overtime cost per unit Subcontract cost per unit Carrying cost per unit per month Assume that the initial inventory has no holding cost in the first period, and backorders are not permitted. Allocating production capacity to meet demand at a minimum cost using the transportation method, the total cost is (Enter your response as a whole number.)arrow_forwardQuestion: What level of safety stock should be maintained? Please show the solution. Thank youarrow_forward
- question #3 Same problem statement: Weekly demand for DVD-Rs at a retailer is normally distributed with a mean of 1,000 boxes and a standard deviation of 150. Currently, the store places orders to the supplier, with a reorder point of 4,200 boxes. The order quantity to the supplier is fixed at 5,000 boxes. Replenishment lead time is 4 weeks, fixed order cost per order is $100, each box costs the retailer $10, and the inventory holding cost is 25% per year. With a safety stock of 300 boxes, what is the approximate service level (round to two decimals)? Numeric Response 84.13 * f5 10 f6 0 4- ♫+ fg C fil W f12. insert prt sc + 11 Ə ← delete backspace home num lock 4x D end 1:23 PM 11/15/2022 pg uparrow_forwardPlease do not give solution in image format thankuarrow_forwardQUESTION 15 ID-planned order release using EOQ technique Clancy's Motors has the following demand to meet for custom manufactured fuel injector parts. The holding cost for that item is $2 per month and each setup costs $80. Lead time is 0 months. Calculate the planned order releases using: the EOQ technique including the holding cost of any inventory left over after month 7? Month Requirement 1 400 What is the total cost? 2016 2509 1405 1536 2 150 3 200 150 100 150 250arrow_forward
- 8arrow_forwardQuestion 3 Which of the following Inventory Holding Costs refers to the cost associated with return on the investment in inventory? Service Capital Cost Space Riskarrow_forwardQuestion 1 The Jelly Bean operation holds an inventory of food colouring which used to colour the jelly beans. The jelly bean operation is interested in calculating the optimal ordering strategy for food colouring. Suppose the annual forecast for the necessary food colouring during a normal year of operation is 13491 litres per year. Furthermore, suppose the holding cost per litre of paint is $11.4 and every time the jelly bean operation issues an order to their supplier, a charge of $451 is added to the invoice as an ordering cost. The supplier charges $5.63 per litre of food colouring. Using the Economic Order Quantity formula, what is the optimal order size that minimises total cost (in Litres of food colouring per order)? a. 1265 litres b. 736 litres c. 1067446 litres d. 26 litres e. 1033 litres Question 2 Using the Economic Order Quantity formula and the data provided above, how many orders will have to be made in a single year? The choices below are all rounded to the nearest…arrow_forward
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,Operations ManagementOperations ManagementISBN:9781259667473Author:William J StevensonPublisher:McGraw-Hill EducationOperations and Supply Chain Management (Mcgraw-hi...Operations ManagementISBN:9781259666100Author:F. Robert Jacobs, Richard B ChasePublisher:McGraw-Hill Education
- Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage LearningProduction and Operations Analysis, Seventh Editi...Operations ManagementISBN:9781478623069Author:Steven Nahmias, Tava Lennon OlsenPublisher:Waveland Press, Inc.