Posted: March 7th, 2014
William Belville’s computer training school, in Richmond, stocks workbooks with the following characteristics: Demand D = 19,500 units/year, Ordering cost S = $25/order, Holding cost H = $4/unit/year. Assume 365 days/year.
1. William Belville’s computer training school, in Richmond, stocks workbooks with the following characteristics: Demand D = 19,500 units/year, Ordering cost S = $25/order, Holding cost H = $4/unit/year. Assume 365 days/year.
a) Calculate the EOQ.
b) Calculate the optimal interval in working days between orders (TBO)?
c) What is the optimal number of orders per year?
d) What are the annual holding costs?
e) What are the annual ordering costs?
f) What are the total annual inventory costs?
2. Based on available information, weekly demand for CD-ROM drives average 50 units (normally distributed), with a standard deviation of demand of 5 drives. Lead time is 1 week. Management wants a 97% service level. They use a continuous review policy. The cost per unit is $85, the ordering cost is $3 and the holding cost rate is 20%. They work 52 weeks/year.
a) What value of z should be applied?
b) How many drives should be carried as safety stock?
c) What is the appropriate reorder point?
d) What is the inventory policy?
3. Crew Soccer Shoes Company is reconsidering its current inventory control system and distribution strategy for soccer shoes. The information regarding the shoes is as follows:
Annual Demand = 1000 pairs/year
Lead time = 1 weeks
Order cost = $35/order
Holding cost = $2.00/pair/year
Service Level = 95%
Standard deviation of annual demand = 1000
Number of weeks/year = 50
If Crew currently has one warehouse and serves both the East and West Coast demand (which are equal and they assume normally distributed and independent), what will happen to demand, total inventory and safety stock if they open a second warehouse? Try to answer in words, then with math.
Assume they use a fixed quantity Q, R system and each warehouse will serve one Coast.’
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