Air Alberta has been using ( Q, r ) inventory policy for a fast-moving spare part for
Question:
Air Alberta has been using (Q, r) inventory policy for a fast-moving spare part for one of its types of aircraft. The properties of this part are:
D = 1920 units/year
Standard deviation of yearly demand = 240
Lead time = 3 weeks
A = $15
Cost = $20/unit
i = 0.2 / unit / year
Whenever a shortage is impending, an expediting action is taken, avoiding the shortage (stock out). The cost of such action is roughly $200, independent of the magnitude of the shortage.
a. Determine the Q, r, fill rate, backorder level, and the expected total relevant costs. Use the stock out approach.
b. A management science graduate, working in Air Alberta’s Operations Research, says that increasing Q to 5 percent above the EOQ will reduce the expected total relevant costs per year. Evaluate this recommendation and discuss.
use excel to solve and show formulas.
Cost Accounting A Managerial Emphasis
ISBN: 978-0131495388
12th edition
Authors: Charles T. Horngren, Srikant M. Datar, George Foster