3) This question will have you calculating 2 EOQ value, 2 ROP values and 2 total...
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3) This question will have you calculating 2 EOQ value, 2 ROP values and 2 total cost calculations and interpreting the results. For both EOQ and ROP, give your final answer in full sock sets (ROUND UP to the next whole number). The specific questions to answer are based in parts a-c. Tips to solve the EOQ and ROP are given below in bullet points. a) Calculate EOQ and ROP for FY2020 based on the FY2020 forecast value, using the forecast method you selected in Q2 b) Calculate the EOQ and ROP based upon actual demand for FY2020 c) Using the responses from parts a & b, indicate what the implications are for inventory management costs in FY2020. In other words, compare the total costs for both EOQ values and analyze what it shows you. Throx uses two main forecasting methods based on annual data to predict orders for the following year, a weighted moving average and exponential smoothing. They provide you with the following information about forecasts for FY 2019 and FY 2020: Weighted Moving Exponential Year Demand Average Forecast Forecast 2019 20,000 21,200 20,440 2020 24,000 20,400 20,132 Weighted Moving Average uses W = 0.8 and W+-1=0.2. Exponential Smoothing uses = 0.7. Inventory Management Information The initial inventory for all sock styles combined at the beginning of FY 2021 is 3,500 units. You also have information on current costs, which includes: Order cost to Throx for an order placed with its current supplier, $/order = S = $500 Holding cost per set per per year = H = $5 The company currently pays $4 for each set of socks. = P The company uses a continuous review replenishment policy, and has IT systems in place that allow constant monitoring of key information. Last year, the company used an ROP under this policy of 1,500 units for all sock styles and an order quantity Q of 5,000 units for all sock styles. 4) Currently, the company is purchasing parts not using an EOQ value. This purchase quantity is given in the case. Using their current order quantity and ROP, calculate the current inventory management costs based upon actual demand in FY2020. Compare this cost to the costs to that would have been realized if the company had used its forecast for FY2020 to calculate EOQ and ROP values (what you calculated in Question 3a). TIP: When calculating costs based upon the forecasted EOQ, use the actual demand as D in your total cost equation. This will ensure you find the true savings or increase that the company would have seen by using the EOQ value and realizing actual demand. 3) This question will have you calculating 2 EOQ value, 2 ROP values and 2 total cost calculations and interpreting the results. For both EOQ and ROP, give your final answer in full sock sets (ROUND UP to the next whole number). The specific questions to answer are based in parts a-c. Tips to solve the EOQ and ROP are given below in bullet points. a) Calculate EOQ and ROP for FY2020 based on the FY2020 forecast value, using the forecast method you selected in Q2 b) Calculate the EOQ and ROP based upon actual demand for FY2020 c) Using the responses from parts a & b, indicate what the implications are for inventory management costs in FY2020. In other words, compare the total costs for both EOQ values and analyze what it shows you. Throx uses two main forecasting methods based on annual data to predict orders for the following year, a weighted moving average and exponential smoothing. They provide you with the following information about forecasts for FY 2019 and FY 2020: Weighted Moving Exponential Year Demand Average Forecast Forecast 2019 20,000 21,200 20,440 2020 24,000 20,400 20,132 Weighted Moving Average uses W = 0.8 and W+-1=0.2. Exponential Smoothing uses = 0.7. Inventory Management Information The initial inventory for all sock styles combined at the beginning of FY 2021 is 3,500 units. You also have information on current costs, which includes: Order cost to Throx for an order placed with its current supplier, $/order = S = $500 Holding cost per set per per year = H = $5 The company currently pays $4 for each set of socks. = P The company uses a continuous review replenishment policy, and has IT systems in place that allow constant monitoring of key information. Last year, the company used an ROP under this policy of 1,500 units for all sock styles and an order quantity Q of 5,000 units for all sock styles. 4) Currently, the company is purchasing parts not using an EOQ value. This purchase quantity is given in the case. Using their current order quantity and ROP, calculate the current inventory management costs based upon actual demand in FY2020. Compare this cost to the costs to that would have been realized if the company had used its forecast for FY2020 to calculate EOQ and ROP values (what you calculated in Question 3a). TIP: When calculating costs based upon the forecasted EOQ, use the actual demand as D in your total cost equation. This will ensure you find the true savings or increase that the company would have seen by using the EOQ value and realizing actual demand.
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