Question

You manage inventory for your company and use a continuous review inventory system to control reordering items for stock. Your company is open for business 300 days per year. One of your most important items experiences demand of 20 units per day, normally distributed with a standard deviation of 3 units per day. You experience a lead time on orders from your supplier of six days with a standard deviation of two days. The unit price, regardless of order size, is $4.75. Your ordering cost is $10. Your inventory carrying cost is 20 percent. You have established a service level policy of 97.5 percent on this item.

**a.** What is your optimal order quantity?

**b.** What is your reorder point?

**c.** How much safety stock do you carry?

**d.** What is your average inventory?

Answer #1

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Wong Enterprises used a Continuous Review System (i.e.,
Q System) for controlling inventory for a specific end-item. The
firm operates 5 days per week and 52 weeks a year and the end-item
has the following characteristics:
Demand (D) = 20,020 units/year
Ordering Costs (S) = $40/order
Holding Costs = $1/unit/six months
Leadtime (L) = 10 days
Cycle Service Level = 94.95%
Assume that Demand is normally distributed; with Standard Deviation
of weekly demand =...

Your cookie supplier delivers roughly five days after you place
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Jake, Inc. begins a review of ordering policies for its
continuous review system by checking the current policies for a
sample of its A items. Following are the characteristics of one
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Demand (D) = 94 units/week (assume 52 weeks per
year)
Ordering and setup cost (S) = $720/order
Holding cost (H) = $23/unit/year
Lead time (L) = 3 weeks
Standard deviation of weekly demand = 30 units
Cycle-service level = 82 percent
Develop the best policies for a periodic-review...

Wong Enterprises used a Continuous Review System (i.e.,
Q System) for controlling inventory for a specific end-item. The
firm operates 5 days per week and 52 weeks a year and the end-item
has the following characteristics:
Demand (D) = 20,020 units/year
Ordering Costs (S) = $40/order
Holding Costs = $1/unit/six months
Leadtime (L) = 10 days
Cycle Service Level = 94.95%
Assume that Demand is normally distributed; with Standard Deviation
of weekly demand =...

The manager of a company is facing an inventory
problem with regard to an item whose demand is known to be evenly
distributed with an annual value of
8,000 units. The cost of placing an order is Rs 50 while the annual
carrying cost of one unit in inventory is Rs 5. Further it is known
that the lead time is uniform and equals 8 working days and that
the total working days in a year is 320 days.
Using...

15. A store has an ordering cost of $250, a carrying cost of
$4 per unit, annual product demand of 6,000 units, and it purchases
product from a supplier for $500 per unit, however, the supplier
has offered the store a discount price of $400 if it will purchase
1,200 units; the store’s minimum total inventory
cost is
a. $2,407,300
b. $3,607,200
c. $3,464,000
d. $2,987,400
16. If a store has annual demand (365 days per year) of 6,000
units...

A local discount store stocks toy race cars. Recently, the store
has received the following discount schedule for these
cars. The annual demand for race case is 5000 cars, the
ordering costs are $49 per order and the annual carrying costs are
20% percent of the unit price.
a.) Indicate the order quantity, price and total cost that will
minimize total inventory costs.
Quantity
Price
1-699 $5.00
700-1999 $4.80
2000
+ $4.75
b.) Assume that the discount store
would like to have a...

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500 miles away, and it usually takes three days to get an order
filled. The average order costs $16 to process and the carrying
cost per case is $40 per year. The store is open 300 days a
year.
A. Determine the economic order quantity.
B. Determine the reorder point if a safety stock of 24 cases is
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Statewide Auto Parts uses a four-week periodic review system to
reorder parts for its inventory stock. A one-week lead time is
required to fill the order. Demand for one particular part during
the five-week replenishment period is normally distributed with a
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Alexis Company uses 800 units of a product per year on a
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hold 10 days usage in inventory as a safety stock Calculate the EOQ
Determine the average level of inventory. (Note: Use a 365 day year
to calculate daily...

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