EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
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Chapter 11, Problem 12PA
Summary Introduction
Interpretation:
T and M for a fixed period of inventory system model with and without safety stocks along with the steps of its operation.
Concept Introduction:
Economic order quantity refers to the number of units that an organization should add to its inventory with all orders in order to decrease the holding, order cost, and shortage cost. It reflects the balance between ordering and holding costs.
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Students have asked these similar questions
Fisk Corporation is trying to improve its inventory control system and has installed an online system at its retail stores. Fisk anticipates
sales of 58,800 units per year, an ordering cost of $4 per order, and carrying costs of $1.50 per unit. In the second year, Fisk
Corporation finds that it can reduce ordering costs to $1 per order, but carrying costs will stay the same at $1.50 per unit.
a-1. What is the economic ordering quantity for the second year?
Economic ordering quantity (EOQ)
a-2. How many orders will be placed during the second year?
Number of orders
a-3. What will the average inventory be for the second year?
Average inventory
Total costs
units
units
a-4. What is the total cost of ordering and carrying inventory for second year?
LA
A sporting goods company has a distribution center that maintains inventory of fishing rods. The fishing rods have the following
demand, lead time, and cost characteristics:
Average demand = 130 units per day, with a standard deviation of 12 units
Average lead time = 12 days with a standard deviation of 1 day
250 days per year in the business year
Unit cost = $28
Desired service level = 97.5%
Ordering cost $53
Inventory carrying cost = 25%
a. What is the standard deviation of demand during lead time?
b. How many fishing rods should the distribution center carry to provide the desired service level?
c. What is the EOQ?
d. What is the average cycle stock?
H & K Electronic Warehouse sells a 12-pack of AAA batteries, and this is a very popular item. Demand for this is normally distributed, with an average of 50 packs per day and a standard deviation of 16. The average delivery time is 5 days, with a standard deviation of 2 days. Delivery time has been found to be normally distributed. A 96% service level is desired.
What is the standard deviation of demand during the lead time?
How much safety stock should be carried, and what should be the reorder point
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