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9. One of the products sold by Packard LaserJet Z99 printer. As purchasing manager, you have the following information for the printer: Average weekly demand (52 weeks per year): Standard deviation of weekly demand: 60 printers 12 printers 3 weeks Order lead time: Standard deviation of order DIS lead time: O (lead times are constant) Item cost: $120 per printer $2 Cost to place an order: Yearly holding cost per printer: $48 Desired service level during reordering period: 99% (z = 2.33) %3D a. () What is the economic order quantity for the printer? b. (**) Calculate annual ordering costs and holding costs (ignoring safety stock) for the EOQ. What do you notice about the two? c. (") Suppose OfficeMax currently orders 120 printers at a time. How much more or less would OfficeMax pay in holding and ordering costs per year if it ordered just 12 printers at a time? Show your work. d. (**) What is the reorder point for the printer? How much of the reorder point consists of safety stock? For parts e and f, use the following formula to consider the impact of safety stock (SS) on average inventory levels and annual holding costs: + Ss H e. (***) What is the annual cost of holding inventory including the safety stock? How much of this cost i due to the safety stock? f. (***) Suppose OfficeMax is able to cut the lead time to constant 1 week. What would the new safety stock leve be? How much would this reduce annual holding costs

9. One of the products sold by Packard LaserJet Z99 printer. As purchasing manager, you have the following information for the printer: Average weekly demand (52 weeks per year): Standard deviation of weekly demand: 60 printers 12 printers 3 weeks Order lead time: Standard deviation of order DIS lead time: O (lead times are constant) Item cost: $120 per printer $2 Cost to place an order: Yearly holding cost per printer: $48 Desired service level during reordering period: 99% (z = 2.33) %3D a. () What is the economic order quantity for the printer? b. (**) Calculate annual ordering costs and holding costs (ignoring safety stock) for the EOQ. What do you notice about the two? c. (") Suppose OfficeMax currently orders 120 printers at a time. How much more or less would OfficeMax pay in holding and ordering costs per year if it ordered just 12 printers at a time? Show your work. d. (**) What is the reorder point for the printer? How much of the reorder point consists of safety stock? For parts e and f, use the following formula to consider the impact of safety stock (SS) on average inventory levels and annual holding costs: + Ss H e. (***) What is the annual cost of holding inventory including the safety stock? How much of this cost i due to the safety stock? f. (***) Suppose OfficeMax is able to cut the lead time to constant 1 week. What would the new safety stock leve be? How much would this reduce annual holding costs

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints
Section: Chapter Questions
Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...
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9. One of the products sold by OfficeMax is a Hewlett- Packard LaserJet Z99 printer. As purchasing manager, you have the following information for the printer: Average weekly demand (52 weeks per year): Standard deviation of weekly demand: 60 printers 12 printers Order lead time: 3 weeks Standard deviation of order DIS lead time: O (lead times are constant) $120 per printer Item cost: Cost to place an order: Yearly holding cost per printer: $48 Desired service level during reordering period: $2 99% (z = 2.33) a. () What is the economic order quantity for the printer? b. (*") Calculate annual ordering costs and holding costs (ignoring safety stock) for the EOQ. What do you notice about the two? c. (*") Suppose OfficeMax currently orders 120 printers at a time. How much more or less would OfficeMax pay in holding and ordering costs per year if it ordered just 12 printers at a time? Show your work. d. (**) What is the reorder point for the printer? How much of the reorder point consists of safety stock? For parts e and f, use the following formula to consider the impact of safety stock (SS) on average inventory levels and annual holding costs: Q. + Ss H 2 e. (***) What is the annual cost of holding inventory, including the safety stock? How much of this cost is due to the safety stock? f. (***) Suppose OfficeMax is able to cut the lead time to a constant 1 week. What would the new safety stock level be? How much would this reduce annual holding costs?
Transcribed Image Text:9. One of the products sold by OfficeMax is a Hewlett- Packard LaserJet Z99 printer. As purchasing manager, you have the following information for the printer: Average weekly demand (52 weeks per year): Standard deviation of weekly demand: 60 printers 12 printers Order lead time: 3 weeks Standard deviation of order DIS lead time: O (lead times are constant) $120 per printer Item cost: Cost to place an order: Yearly holding cost per printer: $48 Desired service level during reordering period: $2 99% (z = 2.33) a. () What is the economic order quantity for the printer? b. (*") Calculate annual ordering costs and holding costs (ignoring safety stock) for the EOQ. What do you notice about the two? c. (*") Suppose OfficeMax currently orders 120 printers at a time. How much more or less would OfficeMax pay in holding and ordering costs per year if it ordered just 12 printers at a time? Show your work. d. (**) What is the reorder point for the printer? How much of the reorder point consists of safety stock? For parts e and f, use the following formula to consider the impact of safety stock (SS) on average inventory levels and annual holding costs: Q. + Ss H 2 e. (***) What is the annual cost of holding inventory, including the safety stock? How much of this cost is due to the safety stock? f. (***) Suppose OfficeMax is able to cut the lead time to a constant 1 week. What would the new safety stock level be? How much would this reduce annual holding costs?
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