EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
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Chapter 11, Problem 1.2DQ
Summary Introduction
Interpretation: The concept of EOQ is to be stated along with the reorder point with safety stock for Strike Disinfectant.
Concept Introduction:
The order quantity that reduces the ordering costs and total holding costs in inventory management is called Economic order quantity.
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The following information regarding inventory policy was assembled by the GB Inc. The company uses a 50-week year in all calculations: Sales: 10,000 units per year Order quantity: 2,000 units Safety stock: 1,300 units Lead time: 4 weeks The reorder point is:
a. 3,300 units
b. 2,100 units
c. 100 units
d.300 units
How are the reorder point and lead time related in inventory analysis?
Please complete the problem usinf EXCEL, Show ALL formulas
Demand for a popular athletic shoe is nearly constant at 800 pairs per week for a regional division of a national retailer. The cost per pair is $54. It costs $72 to place an order, and annual holding costs are charged at 22% of the cost per unit. The lead time is two weeks.
a.
What is the EOQ?
b.
What is the reorder point?
c.
What is the cycle time?
d.
What is the total annual cost?
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- ABC company has a need for goods per week is 100 kg, lead time based on observation = 3 weeks and safety stock is set at 40% of the need during the lead time. Based on these data, are you looking for the reorder point value of ABC company?arrow_forwardThe accountant for one of the PepsiCo factories in Palapye has provided you a list with six items in inventory along with their unit costs and annual demand in units. He has requested that you should assist him apply the ABC analysis todetermine which item(s) should be carefully controlled using a quantitative inventory technique and which item(s) shouldnot be closely controlled.arrow_forwardExplain the importance of inventory, types of inventories, and key decisions and costs. Describe the major characteristics that impact inventory decisions. Explain how a fixed-order-quantity inventory system operates and how to use the economic order quantity (EOQ) and safety stock models.arrow_forward
- A clothing manufacturing company requires raw materials for 8 consecutive weeks as follows: 30, 40, 50, 35, 60, 30, 40, and 30 units with a one-time order cost of $50,000 and a storage fee of $500 per unit/week. From these data calculate the total cost of procurement using:a. Lot For Lot (LFL) Methodb. Economic Order Quantity (EOQ) Methodc. Period Order Quantity (POQ) Methodd. In your opinion as an operations manager at the company which method would you choose? Explain, why?arrow_forwardExplore the concept of reorder point (ROP) within the Wilson Approach. How is it calculated, and why is it crucial for inventory management?arrow_forwardBased on an EOQ-type ordering criterion, what costmust be taken to zero if the desire is to have an orderquantity of a single unit?arrow_forward
- When cycle counting inventory, why do experts recommend a lower acceptable error tolerance for A items than B or C items?arrow_forwardIn the past, Taylor Industries has used a fixed−time period inventory system that involved taking a complete inventory count of all items each month. However, increasing labor costs are forcing Taylor Industries to examine alternative ways to reduce the amount of labor involved in inventory stockrooms, yet without increasing other costs, such as shortage costs. Here is a random sample of 20 of Taylor's items. ITEMNUMBER Annual Usage Item Number 1 $ 2,100 11 $ 14,000 2 13,000 12 1,100 3 2,800 13 44,000 4 52,300 14 10,800 5 10,500 15 1,800 6 1,300 16 11,100 7 2,600 17 4,700 8 11,900 18 63,700 9 5,800 19 4,100 10 16,100 20 3,500 a. Classify each item in inventory using an ABC plan.arrow_forward*Without Explain Please** **Without Explain Please** **Without Explain Please** 1. The purchasing manager of XYZ Company is ordering 2000 pcs of Item A by default every 2 months having a demand of 10000 per year .The ordering cost amounts to BD 10 while the carrying cost of BD 2. What is the Total Cost if the manager will maintain the order quantity? a. BD1050 b. BD 1000 c. BD 5008 d. BD 800 e. None of the answers are correct 2. Mr. Ulrich is the procurement manager of Triple U Limited and he orders 1000 pcs of Item A by default every 3 months having a demand of 5000 per year .The ordering cost amounts to BD 10 while the carrying cost of BD 2. What will be the total cost if you will use the optimum quantity instead of 1000 pcs? a. BD450.56 b. BD800.45 c. BD 447.21 d. BD 500.0 e. BD1200.25 3. Keto Basics is a healthy restaurant that aims to help people reduce weight. They deliver food to individual based on the diet plan, The company uses 10500 pcs of carton boxes every other month ,…arrow_forward
- The following information relates to Unique Ltd for the year 2020: Annual Demand 408,375 unitsAnnual cost of Holding $1.50Annual cost of placing an order $500 (i) Calculate the EOQ (ii) Calculate the average inventory (iii) Calculate the total annual ordering cost (iv) Calculate the total annual inventory cost (excluding the purchase cost)arrow_forwardThe following information regarding inventory policy was assembled by the GB Inc. The company uses a 50-week year in all calculations: Sales: 10,000 units per year Order quantity: 2,000 units Safety stock: 1,300 units Lead time: 4 weeks The reorder point is: 3,300 units 2,100 units 100 units 1,300 unitsarrow_forwardYour firm uses a continuous review system and operates 52 weeks per year. One of the Stock-Keeping Units (SKUs) has the following characteristics:Demand = 20000 units/year = 385 units/weekOrdering cost = $40/orderHolding cost = $2/unit/yearService level = 95 percentz=1.65Lead time = 2 weeksDemand is normally distributed, with a standard deviation of weekly demand of 100 units. a)Calculate the item's EOQ. b)Find the safety stock and reorder point that provide a 95 percent service level. c)For these policies, what are the annual costs of (i) holding the cycle inventory and (ii) placing orders?arrow_forward
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