Jill's Job Shop buys two parts (Tegdiws and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year. Tegdiws are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. Widgets are ordered from a supplier who stops by every five weeks. Data for both products are as follows: |
ITEM | TEGDIW | WIDGET | ||||||
Annual demand | 13,000 | 6,000 | ||||||
Holding cost (% of item cost) | 30 | % | 10 | % | ||||
Setup or order cost | $200.00 | $15.00 | ||||||
Lead time | 3 | weeks | 5 | weeks | ||||
Safety stock | 40 | units | 4 | units | ||||
Item cost | $5 | $6 | ||||||
a. |
What is the reorder quantity and reorder point for Tegdiws? (Round your answers to the nearest whole number.) |
Optimal reorder quantity | units | |
Reorder point | units | |
b. |
What is the inventory control system for Widgets? (Round your answer to the nearest whole number.) |
Inventory control system for Widgets q = ? I (Inventory on hand) |
What is the reorder quantity and reorder point for Tegdiws?
EOQ (Q) = = = 1861.89 = 1862
RP = DL+ SS =( (13000/52)* 3) +40 =790
Optimal reorder quantity = 1862
Reorder point = 790
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b) What is the inventory control system for Widgets?
Widget = Fixed Time period model
Let I the current (on-hand) inventory. Since it is not given, assume it to be zero
q= D( T+L) + SS-I =
(6000/52)(5+5) + 4 – 0 = 1158.84 =1159
Therefore the current inventory system for widgets is to order 1159, based on current inventory.
(Reorder point -Every Five Weeks! When the supplier drops by)
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