Sign In scan0167-003.pdf × 1 3 Page-9- of 10 (25) The TransCanada Lumber Company

Question

Sign In scan0167-003.pdf × 1 3 Page-9- of 10 (25) The TransCanada Lumber Company and Mill processes 10,000 logs annually, operating 250 days per year. Immediately upon receiving an order, the logging company's supplier begins delivery to the lumber mill at the rate of 60 logs per day. The lumber mill has determined that the ordering cost is $1600 per order, and the cost of carrying logs in inventory before they are processed is $15 per log on an annual basis. The optimal order size is approximately a. 1461 logs b. 2066 logs 2530 logs d. 5000 logs (26) In the TransCanada Lumber Company Q (25) above, the number of operating days between orders is b. c. d. 42.2 days 63.3 days 75.5 days 80.7 days [27] In the TransCanada Lumber Company Q(25), the number of operating days required to receive an order is a. 42.2 days 63.3 days c. 75.5 days d. 80.7 days

Explanation / Answer

Given: No. of working days = 250 days, Annual demand = 10,000 units,

daily consumption (d) = 10000 / 250= 40 units ; P = 60 logs per day

25. EOQ = Sq rt [ (2 * Annual demand * ordering cost) / (carrying cost * (1-d/p)]

= Sq rt [ 2 * 10000 *16000 / {15 * (1- ((40 /60)) } ]

2529.82 or 2530 units

26. No. of operating days = EOQ / P = 2530 / 60 = 42.2 days

27. Order cycle time = No of working days / ( Annual demand / EOQ)

= 250 / (10000/ 2530)

= 63.29 or 63.3 days

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