Jill\'s Job Shop buys two parts (Tegdiws and Widgets) for use in its production
ID: 353554 • Letter: J
Question
Jill's Job Shop buys two parts (Tegdiws and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year. Tegdiws are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. Widgets are ordered from a supplier who stops by every five weeks. Data for both products are as follows:
a. What is the reorder quantity and reorder point for Tegdiws? (Round your answers to the nearest whole number.)
b. What is the inventory control system for Widgets? (Round your answer to the nearest whole number.)
ITEM TEGDIW WIDGET Annual demand 15,000 5,000 Holding cost (% of item cost) 15 % 20 % Setup or order cost $ 160.00 $ 15.00 Lead time 8 week 1 week Safety stock 65 units 3 units Item cost $ 10 $ 4Explanation / Answer
a) For TEGDIW
Optimal order quantity = sqrt of (2DS /H)
= sqrt of [(2 x 15000 x 160)/1.5]
= sqrt of 3200000
= 1788.85 or rounded to 1789 units
Reorder point = d x L + Safety stock
= 288.46 x 8 + 65
= 2307.68 + 65
= 2372.68 or rounded to 2373 units
b) For WIDGET
Since WIDGET uses a review period and there is inventory on hand, the inventory control system for WIDGET is fixed time period model
Let the on hand inventory (I) = 0 (As it is not given)
Order quantity = d(L +T) + Safety stock - I
= 96.15(1+5) + 3 - 0
= (96.15x6) + 3 - 0
= 576.9 + 3 - 0
= 579.9 + 0
= 579.9 or rounded to 580 unitsu
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