A certain item is scheduled using production-requirements planning with the purchase order releases being time-phased. A schedule is shown in Table 10-5. The materials manager believes that this schedule may not be the most economical from a supply point of view. The following additional information has been obtained:
Carrying cost = 20% per year
Year = 365 days
Production downtime cost = $150 per day per unit
Item price = $35 per unit
Purchase order preparation cost = $50 per order
Lead time is normally distributed with an average of 14 days and a standard deviation of four days
(a) How much time should be allowed in advance of scheduled receipts for the release of orders?
(b) In period 4, a scheduled receipt is needed to maintain a minimal safety level of 200 units. If there are no minimums on the purchase (order release) quantity, what is the most economic order release size?

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WREK 100 450 100 300 850 100 100 100 Projected groes requirements Scheduled receipts Quantity on hand Planned purchase order releases 900 800 350 250 Table 10-5 A Materials Requirements Planning Schedule in Units