5. At Dot Com, a large retailer of popular books, demand is constant at 34,000 b
ID: 357725 • Letter: 5
Question
5. At Dot Com, a large retailer of popular books, demand is constant at 34,000 books per year. The cost of placing an order to replenish stock is $15, and the annual cost of holding is $2.00 per book. Stock is received 12 working days after an order has been placed. No backordering is allowed. Assume 275 working days a yean Dst Com' osplnal ndar ouane books. (Enter your response rounded to the nearest whole number) b. The optimal number of orders per year is c. The optimal interval (in working days) between orders is d. The demand during lead time is e. The reorder point is f. The inventory position immediately after an order has been placed is orders. (Enter your response rounded to the nearest whole number) days. (Enter your response rounded to one decimai plece.) books. (Enter your response rounded to the nearest whole number.) books. (Enter your response rounded to the nearest whole number,) books. (Enter your response rounded to the nearest whole number)Explanation / Answer
ANSWER
EOQ
Ordering cost, O= $15 per order
Annual Carrying cost per unit, C = $2
Annual Demand, d = 34000
275 working days
Lead time = 12 working days
Optimal order quantity, E.O.Q
= SQRT(2 × Annual demand × Cost Per Order / Carrying Cost per unit per year)
= SQRT(2*34000*(15/2))
=714.14
EOQ=715
Number of orders per year
= Annual Demand/ EOQ = 34000/715 =47.55
Or 48 orders per year
Optimal interval between orders (in working days)
=EOQ/ Annual Demand =(715/ 340000)*(275 days a year)
= 5.78 working days
Demand during lead time
Demand per working day = Annual Demand/ 275 days a year
= 34000/275 = 123.64
Demand during lead time = lead time (in working days) * demand per working day
= 12* 123.64 = 1483.64
Re order point
R = Demand during lead time
= lead time (in working days) * demand per working day
= 12* 123.64 = 1483.64
1484 books
Inventory position immediately after an order has been placed
IP = On hand + scheduled receipts – back orders
= 1484+ 715-0
= 2199
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