Chao Han is the head of the procurement and inventory management unit at a successful tea producer in China. On average, their annual demand for a particular Pu'er tea (Sheng) is 10,000 kg. One of the origins of this tea is Hekai Mountain. Purchasing price of the raw tea is $400 per kilo. Annual holding cost is 30% of purchasing value, and ordering cost per kilo is $30. In case of stockout, customers would wait. However, on average, the cost of backorder per kilo is $25. What is average backorder that Chao faces? O 53.23 kg O 26.61 kg O 70.71 kg O 35.35 kg

Chao Han is the head of the procurement and inventory management unit at a successful tea producer in China. On average, their annual demand for a particular Pu'er tea (Sheng) is 10,000 kg. One of the origins of this tea is Hekai Mountain. Purchasing price of the raw tea is $400 per kilo. Annual holding cost is 30% of purchasing value, and ordering cost per kilo is $30. In case of stockout, customers would wait. However, on average, the cost of backorder per kilo is $25. What is average backorder that Chao faces? O 53.23 kg O 26.61 kg O 70.71 kg O 35.35 kg

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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