A manager must set up inventory ordering systems for two new production items, item X and item
Question:
A manager must set up inventory ordering systems for two new production items, item X and item Y. Item X can be ordered at any time, but item Y can be ordered only once every four weeks. The company operates 50 weeks a year and the weekly usage rates for both items are normally distributed. The manager has gathered the following information about the items
Item x | Item y | |
Average weekly demand | 60 units | 70 units |
Standard deviation | 4 units per week | 5 units per weeks |
Unit cost | RM 15 | RM20 |
Annual holding cost | 30% | 30% |
Ordering cost | RM 70 | RM 30 |
Lead time | 2 weeks | 2 weeks |
Acceptable stockout risk | 2.5% | 2.52% |
- When should the manager reorder item X?
- When should the manager reorder item Y?
- Calculate the total inventory cost for item X
- Compute the order quantity for item Y if 110 units are on hand at the time the order is placed
- Calculate the total inventory cost for item Y
Expert Answer:
