Question

Part A.  For Questions 1-8,

Assume a constant demand, D=90 items/week

Lead time, LT= 1.3 weeks

Safety stock, SS=6

Unit ordering cost, Co=$40/order

Question 1a.  If the lot size, Q=78, then what is the inventory period in months?

(A) 1.00     (B) 0.10     (C) 2.00     (D) 0.20     (E) 0.43

Question 1b.  If the lot size, Q=78, then what is the order frequency in quarters?

(A) 30.0     (B) 10.0     (C) 2.3     (D) 120.0     (E) 15.0

Answer 1

Answer to question 1.A :

When lot size = 78, inventory varies between o ( minimum ) and 78 ( maximum ). Therefore , average inventory = 78/2 = 39

Total demand in a month = 90 items per week x 4 weeks = 360

Therefore , inventory period in months = 39/360 = 0.108 ( 0.10 rounded)

Answer : B ) 0.10

Answer to question 1.b:

Total demand in a quarter ( 13 weeks ) = 90 x 13 = 1170

Lot size = 78

Order frequency = Total demand in quarter / Lot size = 1170/13 = 90

Answer : E ) 15