Answer:
a. 400 unit
b. 240 unit
c. 700 unit
d. 200 unit
Step-by-step explanation:
The annual demand(D) is 5000 units
The ordering cost(S) is $80/order
The annual holding cost rate(I) is 25%
question (a) says , if the Cost of the part is $20 per unit, what is the economic order quantity?
∴ The economic order quantity will be,
Q = (2 × D × S /IC)^(1/2)
Q= (2*5000*80 / 0.25*20)^(1/2)
Q = 160000^(1/2)
Q = 400 unit
(b)
Lead time(LT) for an order is 12 days
and 250 days of operation per year
The reorder point will be
R = D*LT
R= 5000*(12/250)
R = 240 unit
(c) Lead time for the part is seven weeks (35 days)
R = D*LT
R= 5000*(35/250)
R = 700 unit
(d)
In cases of long lead times, the lead-time demand and thus the reorder point may exceed the economic order quantity Q*. Therefore, the inventory position will not equal the inventory on hand when an order is placed, and the reorder point may be expressed in terms of either the inventory position or the inventory on hand.
so average inventory on hand = Q/2
= 400/2
= 200 unit
Answer:
a. Economic order quantity EOQ is 400 units
b. Reorder Point ROP is 240 units
c. Reorder Point ROP is 700 units
d. Reorder Point ROP is 602 units
Step-by-step explanation:
Given Details
Annual demand(D) is 5000 units
The ordering cost(S) is $80/order
The annual holding cost rate(I) is 25% = 0.25
(a)
Cost of the part is $20 per unit
The economic order quantity EOQ
EOQ =√((2D*S)/(IC))
EOQ = √((2*5000*80)/(0.25*20))
EOQ = 400 units
(b)
Number of days of operation per year
is 250 days
Lead time (LT) for an order is 12 days
The reorder point ROP = D*LT
but LT is 12/250 = 0.048
ROP = 5000*0.048
ROP = 240 unit
(c)
Lead time (LT) for the part is seven weeks (35 days) = 35/250 = 0.14
ROP = D*LT
ROP= 5000*0.14
ROP = 700 unit
(d)
ROP if the reorder point for C above is expressed in terms of the
inventory on hand is
ROP at C which 700 units will be subtracted from annual demand of 5000 units = 4300 units
New Demand is 4300 units
ROP = D * LT at C (35 days)
ROP = 4300 * 35/250
ROP = 602 units
