Question

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 = 100 units.

            Current on-hand inventory is 1040 units, with no scheduled receipts and no backorders.

Q#1. The EOQ for this item is:

Q#2. The average time, P (in weeks), between orders is: (round to the nearest week)

Q#3. The safety stock for the Q system is:

Q#4. The safety stock for the P system is:

Q#5. The reorder point, R, in the Q system is (in units):

Q#6. Annual Holding Costs equal (in Dollars):   

Q#7. Annual Costs for placing orders is (in Dollars):

      Q#8. Assuming that a withdrawal of 15 units just occurred, will you place an order?

Q# 9. Assume that we are now operating a P system. Then, the target level, T, is (in units):

       Q# 10. The difference between the safety stock for the P system and the Q system is (in units):

Answer 1