Question

High Tech, Inc. is a virtual store that stocks a variety of calculators in their warehouse. Customer orders are placed, the order is picked and packaged, and then shipped to the customer. A fixed order quantity inventory control system (FQS) helps monitor and control these SKUs. The following information is for one of the calculators that they stock, sell, and ship.
Average demand .............. 12.5 calculators per week
Lead time ................. 3 weeks
Order cost ................ $20/order
Unit cost ................... $8.00
Carrying charge rate ............. 0.15
Number of weeks .............. 52 weeks per year
Standard deviation of weekly demand ....... 3.75 calculators
SKU service level ............. 90 percent
Current on-hand inventory ........... 35 calculators
Scheduled receipts .............. 20 calculators
Backorders ................. 2 calculators
a. What is the Economic Order Quantity?
b. What is the total annual order and inventory-holding costs for the EOQ?
c. What is the reorder point without safety stock?
d. What is the reorder point with safety stock?
e. Based on the previous information, should a fixed order quantity be placed, and if so, for how many calculators?


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  • CreatedSeptember 17, 2015
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