Question

ABC Company annually buys 600,000 units of Part B. The EOQ is 12,000 units. The ABC...

ABC Company annually buys 600,000 units of Part B. The EOQ is 12,000 units. The ABC Company’s average usage equals 2,000 units/day (600,000 units/300 working days) and the average lead-time for ordering Part A is 6 days.

48.  What is the reorder point with no variability in either usage or lead-time?

a.

11,000 units

b.

12,000 units

c.

13,000 units

d.

14,000 units

49.  What is the level of safety stock if usage could be as high as 2,200 units/day?

a.

1,200 units

b.

1,000 units

c.

800 units

d.

600 units

50.  What is the level of safety stock if lead-time could be as high as 9 days?

a.

8,000 units

b.

7,000 units

c.

6,000 units

d.

5,000 units
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Homework Answers

Answer #1

Answer 48: Option (b) 12000 units.

Reorder Point = (Average daily usage rate x Lead time) + Safety stock

Hence, Reorder Point = (2000 units per day x 6 days) + 0 = 12000 units

Answer 49: Option (a) 1200 units.

Safety stock = (Maximum daily usage * Maximum lead time in days) – (Average daily usage * Average lead time in days).

=(2200*6 days) - (2000*6 days) = 1200 units

Answer 50: Option (c) 6000 units.

Safety stock = (2000 units x 9 days) - (2000 units x 6 days) = 6000 units

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