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?

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