Rex manufacturing purchases a printed circuit board for use in its automatic, computerized, robot bartender. The manufacturing facility has placed the following monthly demands on purchased goods inventory during the past year. Month 1 2 3 4 5 6 7 8 9 10 11 12 Demand 205 193 197 220 202 226 179 197 186 202 179 214 This demand schedule can be assumed to be random, to follow a normal distribution, and to be representative of what will occur in the future. Rex estimates that a fixed cost of $300 is incurred each time an order is placed for the boards, and that the inventory holding cost is about 20% per year of the value of inventory. Each board has an estimated value of $192 at the point of storage. The lead time on purchase orders is (1/5) month. Part A: What is the EOQ? Part B: What is the safety stock required to assure the management that the chance of a stock out in a cycle is no more than 1%? Part C: What is the reorder level?
Rex manufacturing purchases a printed circuit board for use in its automatic, computerized, robot
bartender. The manufacturing facility has placed the following monthly demands on purchased
goods inventory during the past year.
| Month | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
| Demand | 205 | 193 | 197 | 220 | 202 | 226 | 179 | 197 | 186 | 202 | 179 | 214 |
This demand
representative of what will occur in the future. Rex estimates that a fixed cost of $300 is
incurred each time an order is placed for the boards, and that the inventory holding cost is about
20% per year of the value of inventory. Each board has an estimated value of $192 at the point
of storage. The lead time on purchase orders is (1/5) month.
Part A: What is the EOQ?
Part B: What is the safety stock required to assure the management that the chance of a stock out
in a cycle is no more than 1%?
Part C: What is the reorder level?
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